Leasehold scandal: leaseholders get new rights in England and Wales

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Homeowners are entitled to extend 990 years of leases and pay no ground rent.

The right to extend their lease for up to 990 years and pay no ground rent would be granted to leaseholders in England and Wales. The government said this would save tens of thousands of pounds for certain households and make home ownership “fairer and safer.”

Several years earlier, the reforms followed an uproar when it emerged that certain apartments and houses were sold with provisions that meant that ground rent would increase significantly in later years.

Approximately 4.5 million households purchase their homes on a land lease, paying an annual rent on the land to the property owner – often an investment company – who, by the lease, gives the right to reside there to the homeowner.

Typically, leaseholds are set at a low rate, but provisions state that leaseholds double every 10 years in some new building projects, making some homes ineligible for mortgages and leaving owners unable to move and facing heavy bills.

Actually, housing leaseholders can only extend their lease for 50 years and pay ground rent once, while unit owners can do so many times, paying a minimum rent for 90 years.

Under the amendments proposed by the Law Commission, both can be renewed for a period of up to 990 years, with zero land rent, and all new retirement homes will be sold without land rent.

Renewing a lease is expensive, but the government said it will alter the way it is measured, including removing costs such as “marriage value,” which requires the leaseholder to share some benefit with the owner from the renewal.

“Across the country, people are struggling to achieve the dream of home ownership, but are finding the reality of being a leaseholder far too bureaucratic, burdensome and costly,” said Housing Minister Robert Jenrick.

“We want to strengthen the security that homeownership brings by forever changing the way we own homes and ending some of the worst practices homeowners face.”
The Law Commission also recommended the adoption of common ownership as the preferred form of ownership for new construction, and the government said it would create a council to “prepare homeowners and the market for widespread adoption.”

Blocks are collectively owned and operated under this model, which is common in other parts of the world but has been used in less than 20 developments in England and Wales, and homes can be bought on a freehold basis.

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