Government Confirms Major Leasehold Changes on the Horizon

Significant changes to English property law and specifically leasehold legislation are set to be introduced as the Government is poised to radically overhaul the system, making it easier and less costly for landlords and property owners to extend leases or convert them to freehold or commonhold in the future.

The Government has announced a package of proposed reforms to the leasehold system that are intended to make it easier and cheaper for leaseholders to own their properties, making the leasehold enfranchisement process much clearer and fairer.

The new measures will see owners potentially able to extend leases by 990 years at nil ground rent, so eliminating the notorious attempts by some freeholders and developers to sell properties with escalating ground rents, and restricted lease extensions that can lead to considerable future costs.

It should also become more straightforward to convert leases to freehold or commonhold status.

The plans, announced last week by housing secretary Robert Jenrick, will see legislation brought forward that will tackle ‘cumbersome bureaucracy and additional, unnecessary and unfair expenses’ that affect up to four and a half million leasehold owners.

Current leasehold system is a ‘source of conflict’

The current leasehold system, which dates back to feudal England, has increasingly become a source of conflict, with property owners facing escalating ground rents and punishing costs for extending leases or buying out freeholds.

Freeholders may increase ground rents without leaseholders seeing any benefits. This can make it more of a challenge to sell the property. In some cases, rents can double at regular intervals.

The existing law dictates that leaseholders of houses are only allowed to extend leases a single time for 50 years with ground rent. Leaseholders of flats however can extend as often as they like at zero ground rent for 90 years.

The plans will see both house and flat owners able to extend leases to 990 years. There will also be an online calculator that will provide leaseholder with an idea of the costs involved in buying their freehold or extending their lease. There will also be a special provision to prevent leasehold abuse as applied to retirement properties.

The culmination of ‘years of campaigning’

Mark Hayward of Propertymark, which represents estate agents and letting agents, said:

“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.

 “Our research in 2018 found that 46 per cent of leasehold house owners were unaware of the escalating ground rent when they purchased their property. 

 “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. 

The government has said that the reform could save leaseholders tens of thousands of pounds in costs.

Concerns expressed over lack of detail

The Leasehold Group has however expressed concerns that the proposals lack clarity and could potentially add a higher degree of confusion. The Group also warns that the reforms ‘fall well short of what is needed’ to transform the sector, and has called for more detail to be provide on timescales and how the reforms will be implemented in practice.

The Law Commission on the other hand has welcomed the reforms, in particular championing the plans to bring commonhold back into the spotlight as an alternative form of property ownership. It has also been confirmed that a Commonhold Council will be set up, comprising leasehold groups and government and industry bodies.

Nick Hopkins, commissioner for property at the Law Commission, says: “We are pleased to see Government taking its first decisive step towards the implementation of [our] recommendations to make enfranchisement cheaper and simpler.

 “The creation of the Commonhold Council should help to reinvigorate commonhold, ensuring homeowners will be able to call their homes their own.”

The Law Commission’s full report into leasehold enfranchisement has informed the government’s recent decision.

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