14 October 2019
According to the Ministry for Housing, Communities and Local Government (MHCLG), there are approximately 4.3 million leasehold homes in England, of which 67% are flats and 33% are houses. Despite there being more flats held on long leases, leasehold houses were the focus of the Law Commission’s report and consultation since 2017.
Specifically, the Government said it would:
• prohibit the creation of new residential long leases on houses
• restrict ground rents in newly established leases of houses and flats to a peppercorn value;
• work with the Law Commission to support existing leaseholders. This will include making buying a freehold or extending a lease “easier, faster, fairer and cheaper.”
Subsequent to consultation responses published in June 2019, the Government said it will bring forward legislation as soon as Parliamentary time allows, but unfortunately issues surrounding Brexit have adversely affected any such timeline.
While the measures set out above are a welcome development in the area of leasehold ownership, at this stage, there is no clear plan as to how to deal with the 67% of existing flats where current leases contain onerous ground rents and the lease extension system is complicated and costly.
On the one hand, leaseholder’s interests are to be protected but to what end? Could anyone who paid for a lease extension be retrospectively compensated?
Similarly, the interests of the freeholder are to be considered, i.e. the freeholder expects that ground rent would be receivable for the duration of the lease unless the lease is extended, in which case they would be adequately compensated. If changes are made, would this no longer be the case?
Many questions are yet to be answered. Only one thing is certain, any legislative changes will be on hold until Brexit is settled. An end to the uncertainty will be welcome news for leaseholders and freeholders alike.
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