Almost 4.5 million leaseholders will be offered the right to extend their lease by a maximum term of 990 years at zero ground rent, the housing secretary Robert Jenrick has announced today.
Today’s measures come as part of the biggest reforms to English property law for 40 years, fundamentally designed to make home ownership fairer and more secure.
Under the existing law many people face high ground rents, which freeholders can increase the with little or no benefit seen to those faced with extra charges. It can also lengthen and lead to increased costs when purchasing or selling the property.
Today’s changes will mean that any leaseholder who opts to extend their lease on their home will no longer pay any ground rent to the freeholder.
For some leaseholders, these changes could save them thousands, to tens of thousands of pounds.
Jenrick commented: “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 home ownership 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.”
Under existing rules, leaseholders of houses can only extend their lease once for 50 years with a ground rent. This compares to leaseholders of flats who can extend as often as they wish at a zero ‘peppercorn’ ground rent for 90 years. Today’s changes mean both house and flat leaseholders will now be able to extend their lease to a new standard 990 years with a ground rent at zero.
A cap will also be introduced on ground rent payable when a leaseholder chooses to either extend their lease or become the freeholder.
The government is also scrapping prohibitive costs like ‘marriage value’ and set the calculation rates to ensure this is fairer, cheaper and more transparent.
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.
New measures will also be introduced to protect those who own homes built specifically for older people.
The government has previously committed to restricting ground rents to zero for new leases to make the process fairer for leaseholders. This will also now apply to retirement leasehold properties.
Consequently, purchasers of these homes have the same rights as other homeowners and are protected from uncertain and rip-off practices.
Leaseholders will also be able to voluntarily agree to a restriction on future development of their property to avoid paying ‘development value’.
Mark Hayward, chief policy adviser, NAEA Propertymark, commented: “We have campaigned for years for changes to the leasehold system and event fees on retirement homes.
“The issue of escalating ground rent on leasehold homes has been a long-term scandal which has left many owners trapped and unable to sell their houses.”
Research by NAEA Propertymark, ‘Leasehold: a Life Sentence’, carried out in 2018, found that 46% of leasehold house owners were unaware of the escalating ground rent when they purchased their property.
Hayward continued: “Over one million households in the UK are sold through a leasehold, and this new legislation will go a long way to help thousands of homeowners caught in a leasehold trap.”
However, while many agents welcome the government’s initiative to reduce ground rents to zero for all new retirement properties, Hayward argues that this now needs to be extended to all retirement properties to create a level playing field.
He added: “Event fees remain a hugely contentious issue which many consumers still don’t understand so we need as much clarity and transparency as possible.”
Legislation will be brought forward in the upcoming session of Parliament, to set future ground rents to zero.