New leasehold reform is a game-changer

Changes to leasehold property law will enable millions of leaseholders to save significant sums – but will these leasehold changes come swiftly enough?

The UK Government announced new leasehold legislation at the start of 2021, which will give leasehold home buyers a legal right to extend their lease for 990 years with zero ground rent. This change is tipped to be the largest UK property law reform in four decades.

Not only will these changes provide assurances for current leaseholders, but it would remove some of the bureaucratic barriers facing those who want to own a home but are worried or confused about entering into a leasehold agreement.

Why Leasehold Reforms Were Needed

A leasehold homeowner is someone who owns a property but not the land it sits on. Therefore, they must pay to live on the land.

Leasehold properties were often sold with contractual clauses deemed unfair and costly, such as fees for adding a doorbell or owning a dog. Anyone buying a leasehold property would have to make significant payments and accept increases in ground rent rates over time.

It became common for ground rent to double over a decade, which didn’t just increase costs, but consequently makes it difficult to sell on properties when buyers wanted to move up the ladder.

The pending leasehold reform will break down barriers and buyer’s concerns about buying a leasehold property in the UK. It will make a leasehold property more attractive and create a feasible way to get on the property ladder.

UK Leasehold Reform in a Nutshell

The new legislation will grant leasehold property owners the legal right to extend their current leasehold by a maximum of 990 years with a ground rent of zero.

To put this in perspective, leasehold house owners were previously only allowed a 50-year extension on the leasehold and had to pay increasing ground rent.

Moreover, those who do wish to extend their leasehold won’t have to shell out some of the expensive fees to do so. Many of the fees needed to extend will be abolished. One of the fees to be cut is the marriage value, which increases costs based on an increase in the value of the property.

When Does the Leasehold Reform Begin?

The UK Government’s announcement suggests the reforms are implemented immediately. However, more clarification will be needed to help property buyers and estate agents transition to the new rules.

February 2021