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Leasehold Reforms: What You Should Know about the Government’s Changes

In this
three-minute read, we look at England’s new leasehold reform package.

What will the new leasehold reforms, announced last week, deliver
for leasehold property owners in London? Here’s what we know so

Now, ‘leasehold reform’ may not be the sexiest of subject
matters, but if you are one of the 4.3 million people in England who owns a
leasehold property, don’t doze off as these changes could significantly impact


England’s medieval leasehold laws are loathed by leaseholders
who have dubbed them ‘fleecehold’ laws. Key gripes include:

The cost of lease renewal or freehold purchase.
This can be tens of thousands of pounds, or even more. If negotiations with the
freeholder break down, the leaseholder can go to a tribunal, but this takes
time and can be expensive.

Escalating ground rents. In the worst cases, the
ground rent on a leasehold house doubles every ten years, leaving the
leaseholder with an ever-growing bill and making it impossible to sell the

Exorbitant service charges for maintaining
communal areas and gardens at apartment blocks.

Freeholds being sold off to a cash-hungry third

Here’s a rundown of the proposed reforms.

No 1:Owners of leasehold homes or flats will be
given the right to extend their lease by a maximum term of 990 years at zero
ground rent. (Currently, leaseholders of houses can only extend for 50 years
with a ground rent while leaseholders of flats can extend as often as they wish
at a zero ‘peppercorn’ ground rent for 90 years.)

Benefit: In theory, the change would provide security
and eliminate ground rent. However, it’s not yet clear how much it would cost
to secure a 990-year lease so it’s impossible to do a cost versus benefit

No 2:Owners of leasehold flats in apartment blocks
will be able to shift to a Commonhold Agreement model.

Benefit: Flat owners could take control of the upkeep
of their building, ending rip-off maintenance charges. Getting all the relevant
parties to agree to move to a Commonhold Agreement may be difficult though.

No 3:Introduction of an online calculator to simplify
determining the cost of buying a freehold or lease extension.

Benefit: This would take some of the hassle out of
the negotiation process but much depends on the formula used to calculate costs.

No 4:The abolition of ‘marriage value’.

Benefit: ‘Marriage value’ is a rather cumbersome rule
that has probably caused a few divorces in its time. It means that if a lease falls
below 80 years, the cost of renewing it shoots up.

When will these changes be introduced?

Legislation regarding change No 1 will be brought forward in
the upcoming session of Parliament. The rest will take longer to realise. (If
you’d like to be kept informed on the progress of these reforms, we’ll be
monitoring the situation closely, so please get in touch with us.)

To learn more about the leasehold changes and how they
could affect the value of your property, get in touch with us here at Holland Properties