Under the current law, many people face high ground rents, which combined with a mortgage, can make it feel like they are paying rent on a property they own. Freeholders can increase the amount of ground rent with little or no benefit seen to those faced with extra charges. It can also lengthen and lead to increased costs when buying or selling the property.
These changes will mean that any leaseholder who chooses to extend their lease on their home will no longer pay any ground rent to the freeholder, enabling those who dream of fully owning their home to do so without unnecessary and unfair expenses – saving them thousands to tens of thousands of pounds.
A cap will also be introduced on ground rent payable when a leaseholder chooses to either extend their lease or become the freeholder. The Government will soon be introducing 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.
Leaseholders of houses can only currently 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. These changes mean both house and flat leaseholders will now be able to extend their lease to a new standard of 990 years with a ground rent at zero.
Further measures will be introduced to protect the elderly. The Government has previously committed to restricting ground rents to zero for new leases to make the process fairer for leaseholders. This will also now apply to retirement leasehold properties (homes built specifically for older people), so purchasers of these homes have the same rights as other homeowners and are protected from uncertain and rip-off practices.
Leaseholders will also be able to voluntarily agree to a restriction on the future development of their property to avoid paying ‘development value’.
Source: NAEA THURSDAY 07 JANUARY 2021