Recently the Government announced reforms to the leasehold system, of which they believe represents some of the biggest changes to English property law in the last 40 years.
Whilst the changes have widely been welcomed, we (like many others within the industry) believe that the reforms may have raised more questions than they have answered. There is obviously still more work to be done, and hopefully more detail to be revealed, so we are considering this to be just the first step in bringing fairness to the leasehold system.
The 3 most significant changes within the reform are as follows: -
Leaseholders now have the right to extend their lease for up to 90 years at zero ground rent
Currently leaseholders of houses can only extend their lease once for a maximum of 50 years at an agreed rent whilst leaseholders of flats can extend multiple times up to a 90 year maximum with a zero ground rent.
There will be a cap on ground rent paid when the leasehold is extended or converts to freehold
As well as saving leaseholders thousands of pounds, there’s now an online calculator which allows leaseholders to find out exactly how much it will cost to extend their lease/ buy the freehold.
There is to be a new Commonhold Council
This group, made up of leasehold groups and industry and government representatives will oversee the roll-out of commonhold, preparing homeowners and the market in general for how this new system will operate.
As well as the above major changes, there are further leaseholder ‘wins’ within the reform pack, including: -
• Right to Manage changes to make the takeover of building management much easier
• The abolition of many prohibitive costs
• Zero ground rents for new retirement properties
• Lower leaseholder costs through voluntary restriction agreements
With somewhere in the region of 4 million leasehold properties in England alone, these reforms have far-reaching consequences and have the potential to improve the lives of many people who have unwittingly been trapped with costly, complicated and restrictive leases.
It is therefore imperative that they are rolled out efficiently, effectively and with the support needed to ensure that the details are understood by all. Indeed, a good starting point would be the clarification of which elements are compulsory or optional and how the industry is to incentivised to comply. And where changes apply to new builds (in the case of retirement homes for example) will these eventually be extended to existing properties to alleviate the problems there?
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The information contained in this article does not constitute financial advice or recommendation and should not be considered as such. Arrow conveyancing does not offer financial advice and is not regulated by the Financial Conduct Authority (FCA), the authors of this article are not financial advisors and are therefore not authorised to offer financial advice.