At the start of 2021, the Ministry of Housing, Communities, & Local Government Housing Secretary, Robert Jenrick released details of new leasehold reforms coming into effect. The reforms announced will make it cheaper for you, as a leaseholder, to own your home with the right to extend your lease by 990 years.
The announcement comes as we begin to see a shake-up to property law that makes homeownership fairer and more secure. Due to these proposed changes and the implementation of these changes’ property owners will now have the right to increase the term of their lease at zero ground rent.
At mortgageassistants.co.uk, we’re working with our clients, carefully providing valuable information and solutions to how these changes can and will affect homeowners.
These latest leasehold law changes are the most significant changes we have seen in over 40 years – and for many, they have come at a great time.
With high ground rents associated with leasehold properties, it can often feel like a huge financial burden, especially when these are in addition to your mortgage repayments too.
In addition, increasing the amount of ground rent can lengthen the property buying and selling process and adds additional costs to the process.
However, with these new reforms afoot, for those leaseholders who choose to extend their lease, you will no longer be liable to pay ground rent to the freeholder.
The latest leasehold news means you can now own your home without the bureaucracy and often unfair expenses, ultimately saving you thousands if not tens of thousands of pounds.
The Commonhold Model
The commonhold is a model that allows homeowners to own their property on a freehold basis.
The benefit to you is that you have greater control, the costs of homeownership are managed fairly, the property is indeed yours, and you can make all decisions.
As your trusted mortgage broker will tell you, currently, leaseholders can only extend their lease up to 90 years, and usually, this is at a zero peppercorn ground rent.
However, higher charges apply when extending leases, and, in some cases, there may be some barriers to extending altogether.
That’s why, if you’re thinking about extending your lease or becoming a freeholder, the good news is a cap will now be introduced on ground rent.
You will also find costs such as `marriage value` will be made fairer, much more transparent, and less costly.
(Marriage value – the increase in the property value once you have extended the lease or indeed where the leaseholder purchases the freehold. Marriage value used to mean that in some circumstances, it would cost you more to extend the lease than the value in its actual extension, placing homeowners in a lose, lose situation).)
All other charges will focus on allowing leaseholders the ability to volunteer to restrictions on future developments on the property to avoid paying `development value.`
Home of mortgages
Finally, these reforms feel that they’re heading in the right direction for homeowners. Finally, buying your leasehold home has been made much easier.
This is a huge relief to millions of leaseholders who are currently stuck paying high ground rent as leaseholders can now extend their lease and won’t pay ground rent to the freeholder.
These changes will also apply to retirement leaseholders, i.e., homes built specifically for older people.
Note: If you’re looking for home loans in the UK, lenders are now offering extremely competitive rates on 10-year fixed-term products.
However, is a long-term fix the right move for you? Check out our post on 10-year fixed-rate mortgages to find out more.
Leasehold advisory service
The Leasehold Advisory Service is a government department designed to provide free advice to leaseholders on the latest law updates surrounding residential leaseholds in England and Wales.
As these reforms come into effect, an online calculator will also be made available so you can find exactly how much it will cost you to extend or buy your lease.
A commonhold council will also be formed to help implement these reforms, consisting of leasehold groups, industry, and government advisors.
The benefits of these reforms in summary include:
- Homeownership brings security and fairness.
- Ground rents to be set at zero.
- Cap on premiums payable.
- Costs such as marriage value will be abolished.
- Great news for those on short leases.
- It will be much easier to buy or sell property as you will know with certainty the final payable premium.
Of course, as with anything, the devils in the detail, for further information and to find out more about leasehold reforms call our team on 0330 229 1991.