Caught in a trap? The leasehold reforms may offer a way out

Leaseholders feeling trapped under the current complex leasehold enfranchisement regime will be pleased to learn that the government has put forward several proposals to make the process less expensive and less complex. The Housing Secretary announced the proposals on 7 January 2021, click here to read the full announcement.

The current procedure

Currently, many leaseholders face high ground rent increases, with limited options to extend their leases without paying extortionate fees to the freeholder. Leaseholders of houses can only extend their lease once for 50 years and must still pay ground rent. Leaseholders of flats can extend as often as they like with a “peppercorn rent” for a term of 90 years.

As many leases have 80 years to run or less, the issue becomes more critical for the leaseholder, because the value of their property will decrease without a lease extension, and their options to sell the property are limited to cash buyers, as mortgage companies are not keen to lend against properties with a lease of less than 80 years.

The new procedure

The new proposals will give leaseholders the right to extend their lease by up to 990 years at zero ground rent, this is a significant change that will benefit 4.5 million people.

Ground rents are going to be set at zero for retirement properties, so that purchasers of these homes are given the same rights as other homeowners.

Further, there is scope to scrap prohibitive costs like “marriage value” and setting calculation rates to ensure the costs payable by the leaseholder are fairer, transparent and cheaper for everyone.

The government is establishing a Commonhold Council to prepare the market for the potential take up of commonhold as an alternative to long leasehold, allowing homeowners to own their property on a freehold basis, with blocks jointly owned and managed by the leaseholders themselves.

The first steps taken by the government will be a welcome relief for those feeling caught in a leasehold trap. However, due to the complexity of the issues involved, and the plans and timetables necessary to introduce the legislation, we may be looking at a further year before the legislation comes into force.

What can you do now?

If your lease has 80 years or less to run, then you should act now to extend it. We can assist you using the current formal or informal route to raise the value of your property and offer you more security.

At Blanchards Bailey we have a strong track record and excellent client feedback in this area from leaseholders and freeholders alike. Whether you are a freeholder, leaseholder, or group of leaseholders looking to purchase your freehold and manage your block as a whole, we can advise you of your rights. Get in touch with our Lease Extension team, Mark Taylor and Alan Horne. Or call today for a no-obligation consultation on 01305 217308.