07/01/2021

Leasehold reform in prospect – part 1

The Government has today announced plans for forthcoming legislation on leasehold reform as an initial step on a programme of reform that broadly follows the Law Commission reports and recommendations.

What was announced today is that there will be legislation that:

Will set ground rent at nil for all new leaseholds, now including new retirement property leases.

Will end ‘marriage value’ as a factor in the cost of lease extensions for existing leaseholders, together with what is described as “A cap on ground rent payable when a leaseholder chooses to either extend their lease or become the freeholder.”

Will bring in a statutory entitlement to a 990 year lease extension at zero ground rent for existing leaseholders (both for flats and houses). (Not entirely sure how this will work where the landlord is a head lessor on a less than 990 year lease, rather than a freeholder, but we will see.)

Leaseholders will also be able to voluntarily agree to a restriction on future development of their property to avoid paying ‘development value’. (NB, this would have to be on enfranchisement, I think. Makes little sense otherwise. Won’t save any leaseholders from the dreaded prospective ‘permitted development right’ adding of a storey or two to a block in the meantime.

There will also be a ‘commonhold council’ – “a partnership of leasehold groups, industry and government – that will prepare homeowners and the market for the widespread take-up of commonhold.”

I understand this will be in two stages. First a bill on new ground rents, then a subsequent bill including lease extensions and enfranchisement. This, I think, makes practical sense, and stops the ground rent reform getting caught in sector arguments over extension/enfranchisement money and complexities.

Comment

There are some things in the leasehold reform asks made by many – and also the HCLG select committee report – that are not addressed in this press release. For example, removal of forfeiture for service charge arrears, and a fresh look at service charge operation overall. But this may be in the trailed legislation, we will have to see.

But what has been announced, for all that there are a lot of questions raised about the hows, is genuinely impressive as a first major step towards the eventual end of leasehold and replacement with commonhold. Though there is a long way to go, it has to be said that these are the most impressive and serious proposals for leasehold reform that have been seen for a very, very long time.

The proposals would offer many – though not all – existing leaseholders a way out of ‘short’ leases and ground rent liability at a rather more affordable price.

It would mean the roll out of a transformation of the basis of leasehold with the removal of ground rent for new leases – but, it is to be hoped, without blighting existing leases too badly given the changes to lease extension costs and terms.

And it would fundamentally change the current economic model of leasehold in a way that should see the gradual exit of ‘ground rent rentiers’ and development for commonhold becoming a much more attractive model.

Yes, the devil will be in the detail, but this sounds like a very good start.

 

 

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts.

3 Comments

  1. John Copeland

    You queried the position about 999 year leases when the landlord only had a 990 year lease. Would this be any different from the current position where a landlord has a lease which expires before the end date of the 90 year extension?

    Reply
  2. Wharfgirl

    How this affects existing leaseholders with 985 year leases and doubling ground rents remains to be seen. Their older flats are already less attractive to buyers. What is going to be the formula for getting rid of our ground rent? Especially if our building breaches the 25% rule. The main financial burden for lessees isn’t actually ground rent anyway. It’s padding of service charges plus inflated “major works”. Until lessees gain control of the management of their blocks the real problems of leasehold will not have been solved.

    Reply
  3. Jamestown

    Finally this absolute debarcle of a archiac (spelling) system is soo to be rid, just how people can justify some of the behaviours . Well actually they can’t which is why its always a favourite past time to see the ground rent owners squirm when you ask them what its for and why is it so high?

    That is probably the only good thing o come from the ground rent scandal is it forced the politicians to act BUT no one under any circumstances could possibly say that this was not always open to manipulation and what i personally consider legal theft.

    Its like we create a system that allows us to extract money (who remember MP’s expenses) from you and if you try to challenge us we will avoid , hide, lie, evade and ignore, disrupt and block etc

    Anyway like Giles says hopefuly they will go after the abhorant service charges that exist out there with little or no transparency

    over and out

    Reply

Trackbacks/Pingbacks

  1. Tessa Shepperson Newsround #177 - The Landlord Law Blog - […] government has announced changes to the long lease regime which are discussed in Nearly Legal here.  With Giles commenting…
  2. Law Commission backs commonhold? It’s not that simple for leaseholders | AL's LAW - […] the government press release here. Nearly Legal sees the proposasl as “the most impressive and serious proposals for leasehold…

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