The government has announced that leaseholders will have a new right to extend their lease by up to 990 years at zero ground rent (“a peppercorn”), a welcomed relief for those with complex issues which in some cases may have also led to some homes being impossible to mortgage on reasonable business terms. Currently, no legislation has been passed through Parliament enacting these new provisions.
It is not clear whether the legislation will include existing leases retrospectively, especially those with “onerous ground rents”. Initial indications suggest that it will only apply to those looking to extend their leases once the legislation has been enacted.
The changes will apply to both house and flat leaseholders with the benefit of potentially saving some leaseholders considerable sums. The aim being to make homeownership “fairer and more secure”.
Lease extensions always come at a cost, but government has stated that they will change the way in which some of these costs are calculated. This is said to include removing costs such as the “marriage value” – which otherwise forces the leaseholder to share a potential profit from the extension with the freeholder. A new online calculator is expected to be introduced to make this process simpler and more transparent.
These changes follow the recommendation made by the Law Commission as a result of many years of campaigning for the change. Whilst these are promising developments it is unclear how long it will take before the necessary legislation is passed. So far no legislation has been forthcoming, we look forward to hearing further details on the plans and timescales. Given the current pandemic it is suspected that this will play its part in delaying legislation being passed in the foreseeable future.
Further details can be found via the governments press release: https://www.gov.uk/government/news/government-reforms-make-it-easier-and-cheaper-for-leaseholders-to-buy-their-homes
Further announcements have also been made following Grenfell and concerns raised over cladding. The government have welcomingly announced that it will be legal responsibility of freeholders to pay for any cladding works required; or to hand over the freeholds to the leaseholders if they cannot or will not pay. Watch the Blog for further information on this topic.