New rights for leaseholding homeowners

June 10, 2021

New law reforms reducing costs are expected to benefit up to 4.5 million leaseholders. 

Aimed at giving property owners a fairer deal, the government has made changes to laws relating to ground rent charges and lease extensions on newly built properties. These changes should significantly increase the equity value of their home. 

Leaseholders of both apartments and houses will now have the right to extend their leases for up to 990 years without the need to pay ground rent to the landlord. The change also means that leaseholders will only ever need to make a maximum of one lease extension during their ownership.

This will especially benefit those owning houses, with the lease extension previously limited to fifty years. Those owning apartments will also benefit from the increase in extensions, previously a maximum of 90 years. Retirement apartments are included in the reform, ensuring that they have the same rights as homeowners.

Current leases reserving ground rent will not be affected, with leases already contracted not implicated in the new laws.

New ground rents have been capped at 0.1% of the freehold value, keeping calculation rates at the market value. Government targets are towards future ground rents of zero.

Further financial bonus is provided with the abolishment of the Marriage Value, meaning that there will be no increase added to the value of the property during a lease extension.

Freeholders have, until now, been able to increase ground rent without giving additional benefits to leaseholders. Homeowners in this position and looking to move will welcome the reform, which makes it easier to extend the lease and therefore achieve a sale.

Online calculators will also be made available to make it easier for leaseholders to work out the cost of extending their lease or buying the freehold to their home.

If you would like advice regarding the leasehold of your property, please contact your local branch, details are available, here.

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