Client Alert

Leasehold Reform Government Press Release

08 Jan 2021

The UK Government announced yesterday (7 January 2021) that leaseholders will be given the right to extend their leases by a maximum term of 990 years at zero ground rent. This announcement forms part of the biggest reform of English property law for almost 50 years in an attempt to make home ownership more equitable and secure.

Under the current law, many long leaseholders face high ground rents, which, combined with a mortgage, can make it feel like they are paying rent on a property they effectively own. This is due to the fact that freeholders can increase the amount of ground rent with little or no benefit seen to those faced with extra charges. Lobbyists have been campaigning for years for the Government to effect this change.

Additional headlines from the announcement by the Housing Secretary, Robert Jenrick, include:

  • the government will establish a Commonhold Council – a partnership of leasehold groups, industry and government – that will prepare homeowners and the market for the widespread take-up of commonhold*;
  • under current 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. Yesterday’s changes mean both house and flat leaseholders will now be able to extend their leases to a new standard 990 years with a ground rent at zero;
  • a cap will also be introduced on the amount payable when a leaseholder chooses to either extend their lease or become the freeholder. 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; and
  • further measures will be introduced to protect the elderly. The government commitment to restrict ground rents to zero for new leases will also now apply to retirement leasehold properties (homes built specifically for older people), so purchasers of these homes have the same rights as other homeowners and are protected from the previous uncertainty.

Legislation will be brought forward in the upcoming session of Parliament to set future ground rents to zero. This is the first part of seminal two-part reforming legislation in Parliament. A response to the remaining Law Commission recommendations, including commonhold, is expected in due course.

Please follow the link for access to the full Government press release.

* The commonhold model is widely used around the world and allows homeowners to own their property on a freehold basis, giving them greater control over the costs of home ownership, and whereby blocks are jointly owned and managed, meaning when someone buys a flat or a house, it is truly theirs and any decisions about its future are theirs, too.

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