Major changes due for Leasehold Extensions

Around 4.5 million people in England who own their home on a leasehold basis will be given the right to extend their lease by 990 years at zero ground rent, following new Government reforms. These changes will apply to both house and flat leasehold ownership.

Further to recommendations made by the Law Commission in 2020, on 7 January 2021 the Secretary of State for Housing, Robert Jenrick, announced the Government would introduce radical changes to the rules governing leasehold ownership of flats and houses, which will enhance the rights of millions of residential leaseholders.

A headline change is a substantial increase to the number of years by which a leaseholder can extend their lease. Present rules allow leaseholders of houses to extend their lease for 50 years with a ground rent, and leaseholders of flats to extend at a zero ‘peppercorn’ ground rent for 90 years. The changes will entitle leaseholders of both houses and flats to attend their leases by 990 years, at zero ground rent.

The Government will also introduce a cap on the sum payable to the Landlord when a leaseholder chooses to either extend their lease or purchase the freehold of their premises (known commonly as a ‘premium’). An online calculator will be introduced to make it simpler to calculate how much it will cost to buy the freehold or extend the lease.

In addition, the Government is also introducing further measures to protect the elderly, including applying the reforms on zero ground rent to all new retirement leasehold properties, to ensure purchasers of these homes have the same rights as other homeowners.

These reforms to ground rent will make leasehold homeownership fairer and more secure, bringing the often-continuous increase in ground rent – particularly seen in new developments – to an end. At this stage, the reforms will only apply to England; we await the Welsh government’s response to the Law Commission’s report.

Following the Law Commission’s recommendations, the Government is also establishing a ‘Commonhold Council’, that it is hoped will re-invigorate the demands for ‘commonhold’ ownership. ‘Commonhold’ usually allows a homeowner to own the freehold of their flat in a multi-occupancy building, whilst sharing ownership of common areas with other residents. The Council will promote and prepare homeowners and the market for the take-up of commonhold.

The Government has confirmed that legislation introducing these measures will be brought forward in the upcoming session of Parliament. It appears the legislation will be brought forward in two tranches.

Whilst we eagerly await the publication of the Government’s White Paper and draft Bill, if such measures are introduced, they will be part of the largest shake-up in England’s leasehold rules for decades.

For information and advice regarding leasehold properties or property related disputes please contact Peter Knibbs at peter.knibbs@bpe.co.uk or call 01242 248239 or Emma Weedy at emma.weedy@bpe.co.uk or call 01242 248493)

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