What would a lease extension mean for leaseholders?

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Leaseholders in England will soon be able to extend their leases by a maximum of 990 years, without paying ground rent, if plans announced by Housing Secretary, Robert Jenrick, go ahead.

This reform is part of major changes proposed by the government on 7th January 2021 in order to make home ownership “fairer and more secure”, and is an encouraging sign, given the current outdated legislation.

Can leaseholders currently extend their lease?

Subject to satisfying certain criteria, those who own a leasehold flat can extend their leasehold as often as they like, and at a ‘peppercorn’, i.e. £0.00, ground rent for 90 years.

What are the proposed changes for leaseholders?

Aside from leaseholders being able to extend their lease by 990 years, there are other proposed changes. These include:

  • A cap on ground rent payable by leaseholders extending a lease and becoming a freeholder.
  • Abolishment of other charges, including ‘marriage value’, which comes into force in leases with less than 80 years remaining. However, this may be replaced or taken into consideration under their new calculations for the premium.
  • An extension on zero ground rents for leasehold retirement properties.

How would a lease extension benefit leaseholders?

This leasehold reform will mean that all leaseholders can extend their lease for an additional 900 years without paying ground rent to the freeholder.

The Housing Secretary has said that these plans aim to make the lease extension process “fairer and more secure”. However, over nine months have elapsed since the plans were announced and no details have actually been given as to how they intend to do this. Many leaseholders can already extend their lease by 90 years (plus their current term). It is not yet clear whether these proposals are going to significantly benefit leaseholders.

Further information

We do not yet know when these changes come into force but we will keep you updated. In the meantime, to talk to our specialist property litigation solicitors about any landlord and tenant matter, call us on 0117 325 2929 or fill out our online enquiry form.

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