Leasehold Scandal to End as Homeowners Granted New Rights
“Fleecehold” clauses that multiplied ground rents and left homeowners trapped are set to be addressed through new measures.
Planned reforms of the controversial leasehold system in England will see leaseholders given the right to extend their lease by up to 990 years at zero ground rent, housing secretary Robert Jenrick announced on Thursday.
The changes address a scandal that emerged several years ago as it was found that a number of houses and flats had been sold with clauses meaning that ground rents would rise dramatically years on.
Roughly 4.5 million English and Welsh homeowners own their property on a leasehold basis, paying an annual ground rent to the property’s freeholder, which then grants the homeowner the right to continue living there through the lease. While ground rents are often set at a low “peppercorn” rate, clauses in some new developments state that rents would double every 10 years, which left some homes unmortgageable and their owners unable to move while running up large bills.
Currently, leaseholders of houses can only extend their lease once for a fixed 50-year period while paying a ground rent, while flat owners can do so multiple times with a “peppercorn” ground rent of zero for 90 years. Thursday’s measures will ensure that leaseholders who opt to extend the lease on their home will no longer pay any rent to the freeholder.
The new measures come as part of the widest reforms of English property law in 40 years, aimed at making home ownership ”fairer and more secure”.
“Across the country people are struggling to realise the dream of owning their own home but find the reality of being a leaseholder far too bureaucratic, burdensome and expensive,” Jenrick said.
“We want to reinforce the security that home ownership brings by changing forever the way we own homes and end some of the worst practices faced by homeowners.”
In addition to the changes made to lease terms and ground rents, the government is also scrapping prohibitive costs like “marriage value” and introducing an online calculator to make it simpler for leaseholders to calculate how much it will cost them to extend their lease or buy their freehold.
