Major shake-up of laws relating to Leasehold Properties

The Government has today announced substantial proposed changes to English property law which could benefit around 4.5 million leaseholders.

Under the current rules, leaseholders of houses can only extend their lease once for 50 years with a ground rent. In comparison, leaseholders of flats can extend as often as they wish for 90 years at a zero-ground rent. The proposed changes mean that both house and flat leaseholders will now be able to extend their leases to 990 years with a zero-ground rent.

What is the Government proposing?

The Government has also outlined the following proposals:

• A cap will be introduced on the ground rent payable when a leaseholder chooses to extend their lease or purchase their freehold.
• The abolition of factors such as ‘marriage value’, and the reduction in the rates used to calculate the cost of extending the lease or purchasing their freehold.
• Enabling leaseholders to voluntarily agree to a restriction on the future development of their property to avoid paying ‘development value’.
• The introduction of an online calculator to enable leaseholders to find out how much it will cost to extend their lease or purchase their freehold.
• Requiring new retirement leasehold properties (homes built specifically for older people) to have a zero-ground rent.

The Government is also establishing a Commonhold Council (a partnership of leasehold groups, industry, and government) that will prepare homeowners and the market for the envisioned widespread take-up of commonhold.

The Government plans to introduce these changes during the upcoming session of Parliament. A response to the remaining Law Commission recommendations, including commonhold proposals, is intended to be provided in due course.

Financial savings

The Government predicts that for some leaseholders, these changes could save them thousands, to tens of thousands of pounds. Professor 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.”

Overall, the proposed changes have been warmly received in the Property sector and expect to make the process for extending your lease or buying your freehold fairer, cheaper and more transparent. 

More information

Pinney Talfourd are experts in residential property litigation and can advise you on changes to the law so you are given up to date advice.

Please do not hesitate to contact Oliver-James Topping on 01708 463227 should you wish to discuss anything further.

The above is meant to be only advice and is correct as of the time of posting. This article was written by Oliver-James Topping, Solicitor in the Residential Property Litigation Team at Pinney Talfourd LLP Solicitors. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as of January 2021.