The Government recently announced that all leaseholders in England will be given new rights, allowing them to extend their lease by up to a maximum term of 990 years. Under the new reforms, they also won’t be required to pay ground rent.
Announced on 7 January 2021, and expected to be in place by spring 2022, millions of leaseholders will benefit from the news. It is expected to save some households tens of thousands of pounds and it will make homeownership fairer and more secure. So, it’s no surprise that these new changes have been welcomed by leaseholders throughout England.
Why is this important?
Approximately 4.5m households in England and Wales own their homes on a leasehold basis and pay annual ground rent to the freeholder of the property.
At the moment, leaseholders of houses can only extend their lease once, for 50 years and they must also pay ground rent. Flat owners, however, have the right to extend their lease multiple times, for 90 years.
What do the changes mean for leaseholders?
Following the announcement, both homeowners and flat owners will now be able to extend up to 990 years, with ground rent at zero. The new legislation also means that all new retirement properties will be sold without a ground rent.
The UK housing secretary, Robert Jenrick, has made no secret of the fact that extending leases in this way will come at a cost. He has been quoted in the press stating: “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.”
This new legislation applies to all leaseholders who can extend their lease. However, if there's a specific clause in your contract stating you live in a National Trust property or on Crown Estate, you may not be able to take advantage of the new reforms.
It’s also worthwhile remembering that ground rent will only be stopped for those who choose to extend their lease. If you don't, you may still be charged.
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