Government pledges to cut costs to leaseholders with major reforms

The changes will make home ownership 'fairer and more secure' and save leaseholders thousands of pounds, the government said.
A row of terraced houses on a hill in England.
A row of terraced houses in England. Credit: Pixabay

The government has pledged to cut costs to leaseholders as it announced the biggest reforms to English property law for 40 years.

Under the planned reforms, millions of leaseholders will be given the right to extend their lease for a maximum term of 990 years while paying zero ground rent.

The government says that its proposed changes will fundamentally make home ownership ‘fairer and more secure’, potentially saving leaseholders up to tens of thousands of pounds.

The housing secretary Robert Jenrick MP said: “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.”

Currently, leaseholders of houses can only extend their lease once for 50 years with a ground rent, compared to leaseholders of flats who can extend as often as they wish for a zero ‘peppercorn’ ground rent for 90 years.

Now both house and flat leaseholders will now be able to extend their lease to a new standard 990 years with zero ground rent, while a cap will be introduced on the amount of ground rent freeholders can charge.

Costs such as ‘marriage value’ will be scrapped, while ground rents will be set to zero for new leases and retirement leasehold properties.

Leaseholders will also be able to volunteer to restrict future development on their property in order to avoid paying ‘development value’.

The government is now establishing a Commonhold Council – made up of leasehold groups, industry and government – to prepare homeowners and the market for a new commonhold system.

The commonhold system allows homeowners to own their individual house or flat on a freehold basis, giving them greater control over the costs of owning their home. The homeowners will also jointly own and manage the rest of their building or their estate.

The system, already widely used around the world, has seen a greater push in England following the Grenfell Tower fire and difficulties faced by leaseholders in making their tower blocks safe.

Professor Nick Hopkins, commissioner for property law at the Law Commission said: “We are pleased to see government taking its first decisive step towards the implementation of the Law Commission’s 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 government will seek to bring forward the relevant reforms during this parliament, and respond to the Law Commission’s remaining recommendations in due course.

Related Posts