Exciting changes ahead for leasehold properties

The government have announced upcoming changes to leasehold properties

Peter Barton

By Peter Barton, Partner and Head of Equity Release at Ashfords

Far-reaching changes to lease extensions

No this is not a reference to the lifting of lockdown restrictions (obviously that is exciting) but I am actually referring to impending changes being brought in (we expect) later this year to the law affecting lease extensions which could save leasehold property owners thousands if not tens of thousands of pounds.

In January of this year the Housing Secretary announced far reaching changes. Under current rules, leaseholders of flats can extend their lease at a zero ‘peppercorn’ ground rent, but usually only for 90 years. Leaseholders can also face high charges to extend their lease.

For leasehold house owners, which face slightly different rules, they can also face barriers when they look to extend their leases.

New standard lease extensions and a cap on ground rent

The changes proposed mean both house and flat leaseholders will now be able to extend their lease to a new standard 990 years with a ground rent at zero.

A cap will also be introduced on ground rent payable when a leaseholder chooses to either extend their lease or become the freeholder. An online calculator will be introduced to make it simpler for leaseholders to find out how much it will cost them to buy their freehold or extend their lease. The government is abolishing prohibitive costs like ‘marriage value’ and set the calculation rates to ensure this is fairer, cheaper and more transparent.

Additional protections for elderly people

The government has previously committed to restricting ground rents to zero for new leases to make the process fairer for leaseholders. This will also now apply to retirement leasehold properties (homes built specifically for older people), so purchasers of these homes have the same rights as other homeowners and are protected from uncertain and rip-off practices.

Leaseholders to be able to restrict future development

Leaseholders will also be able to voluntarily agree to a restriction on future development of their property to avoid paying ‘development value’. Legislation will be brought forward in the upcoming session of Parliament, to set future ground rents to zero.

Good news for customers

The above is hugely beneficial to our customers who are looking to take out a lifetime mortgage but who need to extend their lease at the same time as the above proposals will save them thousands of pounds in the premia which can often be crippling or a deterrent to proceeding.

Currently there is no precise timeline as to when these measures will be introduced, or indeed if it will be watered down, but the signs so far are positive.

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