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Leaseholders to be given right to extend leases by 990 years with no ground rent
Leaseholders in England are to be given the right to extend their leases by up to 990 years at zero ground rent, in a move the government claims could save households tens of thousands of pounds.
The Ministry of Housing, Communities and Local Government said it is also working on establishing a Commonhold Council involving government, leasehold groups and industry representatives to prepare the market for widespread take-up of commonhold.
Traditionally used for flats but also applied to new build houses in recent years, leasehold means the deedholder does not own their home outright and must usually pay an annual ground rent to the freeholder.
Freeholders are able to increase ground rent at their discretion without providing extra benefit to leaseholders.
The system has come under major scrutiny in recent years, after a 2016 investigation by The Guardian found that some developers were using contracts on leasehold houses to double ground rents every 10 years – making it very difficult for leaseholders to sell their homes on.
Ministers announced plans to tackle leasehold exploitation in July 2017, but no legislation has yet come forward.
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The government said measures announced today will form part of the biggest reforms to English property law for 40 years.
Current rules mean flat leaseholders can extend their lease at a ‘peppercorn’ ground rent for up to 90 years at a time, while house leaseholders can only extend once for 50 years, with higher ground rent.
Once the necessary legislation is passed, leaseholders of both flats and houses will be able to extend to 990 years with zero ground rent.
Ministers have also reversed a previous decision to exempt retirement properties from a promise to reduce ground rents on most need leasehold homes to zero.
Housing secretary Robert Jenrick 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 homeownership 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.”
The announcement follows reports into leaseholder enfranchisement published last year by the Law Commission which made similar recommendations.
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.”
Commonhold, which is widely used in other countries around the world, allows flat owners to own their blocks jointly on a freehold basis.
