What is changing?
Under the new legislation, the sale of new houses as leaseholds will be largely prohibited, except for flats and maisonettes. The objective is to free many homeowners from the often onerous terms dictated by their leases. Notably, for new lease agreements, ground rents are anticipated to be set to a symbolic ‘peppercorn’ rate, eliminating the financial burden historically imposed on leaseholders. Additionally, the ability to extend leases is expected to be substantially simplified and enhanced, with terms potentially extending to an unprecedented 990 years, as opposed to the current 90-year extension limit.
Potential implications for existing lease holders
The implications for existing leaseholders, particularly those with diminishing lease lengths, could be complex. As the market adjusts to the incoming regulations, these homeowners might face challenges when selling their properties, given that buyers may prefer waiting for the new, more favorable leasehold terms to take effect.
Industry experts, including those from the Association of Leasehold Enfranchisement Practitioners (ALEP), have welcomed the proposed reforms, recognising the potential for a fairer and more equitable system. However, there is a degree of skepticism concerning the intricacy of the legislation’s implementation and its timing, particularly with the looming general election, which could delay its enactment.
It is vital to understand the distinction between freehold—where both the property and the land it stands on are owned indefinitely—and leasehold—where the property is owned for a fixed term, but not the land itself. This foundational aspect of property ownership is at the heart of the proposed reforms.