Reforms could let leaseholders extend tenancies free of charge

A major shake-up of property laws could see millions of leaseholders be handed the right to extend their long-term tenancies by 990 years, free of charge.

 

The Housing Secretary, Robert Jenrick, said leaseholders would be able to secure the extension without paying any extra ground rent, potentially saving them tens of thousands of pounds. The changes will also end the discrepancy between leaseholders of houses, and those with leases on flats.

 

At present only those with leasehold houses can only extend their lease once for 50 years, and those with leases on flats can extend as often as they wish in 90-year blocks.

 

To be set out in new legislation the reforms will enable leaseholders of both houses and flats to extend their lease by a new standard of 990 years without any extra cost. The current law in England rules that homeowners who take out a leasehold have to pay a ground rent to the freeholder or landlord of the property.

 

While this is often set at a low rate, typically £50 per year, some contracts allow for the payments to escalate over time, meaning after a third of the contract has expired it could double to £100 and towards the end increase again to £150 annually. However, in some cases where rates are higher, it can lead to charges soaring to thousands of pounds a year.

 

Mr Jenrick said: "Across the country people are struggling to realise the dream of owning their own home but find the reality of being a leaseholder far too bureaucratic, burdensome and expensive. We want to reinforce the security that homeownership brings by changing forever the way we own homes and end some of the worst practices faced by homeowners. These reforms provide fairness for 4.5 million leaseholders and chart a course to a new system altogether."

 

The expectation is that an online calculator will be introduced to make it simpler for leaseholders to find out how much it will cost them to buy their freehold or extend their lease.

 

Meanwhile, ministers also intend to ensure that elderly people are protected from "rip-off practices" by extending restrictions to grounds rents for new leases to retirement leasehold properties.

 

The Government is establishing a Commonhold Council made up of leadership groups, the housing industry and ministers to begin a transition away from leasehold. Under a shift to "commonhold", used more widely in countries such as Australia, Canada, and the US, homeowners will be able to more easily own their properties on a freehold basis, giving them greater control over the costs of homeownership and management and upkeep of their building.

 

 

PM Law 

Sheffield Solicitors