Government reforms on leasehold home ownership

Why are changes necessary?

The leasehold system has been described as inconsistent, unnecessarily complex and inherently unjust for leaseholders. Unsurprisingly therefore, the Government has come under increasing pressure to make a change. As a result, in 2018 the Law Commission was tasked with finding ways to make extending a lease or buying a freehold “easier, faster, fairer and cheaper”.

This latest Government announcement follows the Law Commission’s recommendations published last year, following their full review and consultation of leasehold home ownership.

What changes are the Government proposing for leasehold home ownership?

• A right for leaseholders (of houses and flats) to extend their leases by 990 years, at a zero ground rent.
• A commitment to restrict ground rents to zero for new leases – which has now also been extended to retirement properties.
• ‘Marriage value’ to be abolished.
• An online calculator to be introduced, with prescribed rates, to make it simpler for leaseholders to find out how much it will cost them to extend their lease/buy their freehold.
• An ability for leaseholders to opt for a restriction on their title to avoid paying development value.
• A Commonhold Council to be established to help prepare homeowners and the market for the widespread take-up of commonhold.

When are these changes likely to be implemented?

At this stage, the Government has simply announced the headlines. And of course the devil will be in the detail, and that is yet to come.

All we know is that a Bill in the forthcoming Parliamentary session will set future ground rents to zero. Responses to the Law Commission’s remaining recommendations will be issued “in due course” and translated into law “as soon as possible”. However, having regard to the likely landlord challenge, it could be a number of years before the sector sees any substantial reform.

The big question for leasehold homeowners

Many leaseholders will be asking themselves whether they should extend their lease (or buy their freehold) now, or hold off and wait for the new (potentially better) regime.

Whilst it is clear that the Government is committed to introducing change, there is still a really long road ahead. At this stage, we have very little detail on what the process will eventually look like, or when that is likely to be clarified.

With this in mind, and the fact that a lease is a wasting asset (to which the property’s value is attributed), we would advise that in the majority of cases, it is probably best just to get it done. Contact our leasehold enfranchisement lawyers if you have any questions regarding leasehold home ownership.

This article is part of Private Client Issues – February 2021