Leaseholders to be given right to extend lease by 990 years at zero rent

The UK government announced today that it plans to pass legislation giving the right to leaseholders to extend their lease by 990 years at zero ground rent.

This will apply to both leasehold houses and flats and the government estimates it will benefit some 4.5m leaseholders.

Housing secretary Robert Jenrick said: “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.

“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.

“These reforms provide fairness for 4.5m leaseholders and chart a course to a new system altogether.”

Under current rules, leaseholders of houses can only extend their lease once for 50 years with a 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.

In a report in July the Law Commission said there was “no reason” for leaseholders’ rights to diverge, and recommended a uniform right to extend a lease for all qualifying leaseholders.

Under the proposed new rules both house and flat leaseholders will be able to extend their lease to a new standard 990 years (meaning effectively a lease need only be extended once) with a ground rent at zero.

Further proposals include ground rents being reduced to zero on all retirement properties and the scrapping of ‘marriage value’ – the supposed value of joining up leasehold with freehold.

Owners of leasehold property will welcome the news, but may have to bide their time as experts warned the changes required to legislation will be complex and may not come to fruition for over a year.

Leasehold tenure is already banned on new build houses, and does not exist at all in Scotland. The Law Commission recommended last year that leasehold should be replaced with commonhold tenure on new homes, whereby ownership and management of land and buildings belongs jointly to the residents of a shared block. Commonhold has been permitted in the UK since 2002 but has often faced legal hurdles – now it is proposed to set up a ‘Commonhold Council’ made up of leaseholder groups, industry and the government, to prepare for a wider take up of commonhold and ‘in due course’ further legislation to implement fully the Law Commission’s recommendations.