Leasehold Reform
The leasehold system is an enduring source of controversy, with critics arguing that freeholders are profiting from homeowners’ suffering under onerous lease terms. The Government’s aim is to reverse this inequality, making homeownership fairer and easier for all leaseholders.
The first phase of reform will happen from 30 June 2022, and will prevent ground rent fees being charged to leaseholders when they buy a new property. This change is a win for homebuyers, who have often been faced with expensive ground rent fees and have found them prohibitively expensive to extend or sell the property.
Currently, most residential properties in England and Wales are leasehold. This means that leaseholders can only live in the property for a specific period of time. They then revert to the landlord (freeholder) at the end of their lease.
Leasehold Reform – When Will It Happen?
It is possible for leaseholders to extend their lease term by buying the freehold of the property or agreeing an informal lease extension, but the process can be very expensive and time-consuming. The second part of leasehold reform will introduce a statutory lease extension, which will give flat and house leaseholders the right to extend their lease for 990 years without paying ground rent.
This will help to reduce the cost of extending or purchasing a freehold for some leaseholders, who may save tens of thousands of pounds by taking advantage of these changes. However, it is likely that many of these changes will not take effect until 2022 as the Bill requires Royal Assent and therefore it is unlikely that it will pass into law this year.
The new rules will not apply to retirement home leases (leases relating to flats and houses that are only occupied by people aged 55 or over). Instead, the Government has included an extended grace period in the legislation to allow this sector to adapt.
If you own a leasehold property and would like to find out more about the changes in this Bill, or to discuss any concerns you have about your lease, please do not hesitate to contact us. We will be able to guide you through the process and help you avoid costly pitfalls along the way.
We can also provide you with a free, no obligation quote for your leasehold legal work if you have any questions. Simply get in touch to arrange a consultation, or complete the online form at the bottom of this page and we will contact you.
There is no immediate news about when the Government will announce further leasehold reforms, but it is expected that further legislation will be introduced during this Parliament. In January 2021, Robert Jenrick, the previous Secretary of State, announced that two pieces of legislation would be introduced towards leasehold reform in the future.
The Government’s stance on leasehold reforms has shifted considerably since the cladding scandal, and it is likely that further reforms will be announced by 2022. As a result, many homeowners and prospective leaseholders are waiting to see whether there will be any further changes.
