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England - New lease extension rights for leaseholders

Under current rules, leaseholders of houses can only extend their lease once for 50 years with ground rent. This compares to leaseholders of flats who can extend as often as they wish at a zero ‘peppercorn’ ground rent for 90 years. The changes mean both house and flat leaseholders will now be able to extend their lease to a new standard 990 years with a ground rent at zero.

This is the first decisive step towards the implementation of the Law Commission’s recommendations and is the biggest reforms to English property law for 40 years, fundamentally making homeownership fairer and more secure. These reforms will apply, at this stage, to England only as the Welsh government has not yet announced its response to the Law Commission’s report.

Many people in England own their homes on a leasehold basis and are required under the terms of their lease to pay annual ground rent to the freeholder of the property.

In many cases, these annual ground rent sums are set at a low or 'peppercorn' rate but sometimes, particularly in some newer developments, these ground rents are set to double every 10 years, making some homes unsellable.

The government will introduce:

  1. a cap on ground rent payable when a leaseholder chooses to either extend their lease or become the freeholder;

  2. an online calculator to make it simpler for leaseholders to find out how much it will cost them to buy their freehold or extend their lease; and

  3. further measures to protect the elderly by making these reforms equally applicable to retirement leasehold properties.

In addition, the government will abolish prohibitive costs like ‘marriage value’ and set the calculation rates to ensure this is fairer, cheaper and more transparent.

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