Millions of homeowners will be freed from expensive ground rents, with a potential saving of thousands of pounds after the UK government announced the biggest change to property law in over 40 years.
According to a UK.GOV press release, leaseholders will now be allowed to extend their leases to 990 years with zero ground rent under the new legislation which will be enacted immediately. The costs for extending a lease, which can run into thousands of pounds will also be removed under the new plans.
Ground rents levied by investors who own the freehold to people’s homes have left many leaseholders with huge bills for nothing in return. Freeholders, who technically own the land and building, can increase the amount of ground rent without providing any benefit to homeowners.
Leaseholders have seen ground rents double in some cases, often rising at such a rate it has left them unable to sell their homes.
The current rules mean that leaseholders of houses can extend their leases only once for 50 years with ground rent, while leaseholders of flats can extend as often as desired at a zero ground rent for 90 years.
The new changes mean that both flat and house owners will now be able to extend their lease to a new standard length of 990 years with zero ground rent. Ground rents will also be reduced to zero on all new retirement homes.
However, the legislation does not include processes for compensating leaseholders who believe they have been overcharged.
Last year, the Law Commission recommended that leasehold should be replaced with commonhold tenure on new homes, which gives ownership and management of land and buildings jointly to the residents of a shared block.
The Ministry of Housing, Communities and Local Government (MHCLG) said it would create a ‘Commonhold Council’ to prepare for the widespread take-up of commonhold. The council will be made up of leasehold groups, industry and government.
MHCLG promised to separately bring forward further legislation to implement the Law Commission’s remaining recommendations, including the switch to commonhold, in due course.
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