Government set to revamp Leasehold costs
Revised legislation of the current leasehold system in England is set to limit the cost of extending a lease which in turn will help people with short leases worried about the large costs involved.
It is believed these new government proposals could affect up to 4 million homes and thought that former council tenants who have bought their own homes could be amongst those to benefit.
Freehold vs Leasehold
A freeholder owns the land the property is built on, whereas a leaseholder owns the property for the term of the lease. At the expiry of the term, the property would then revert back to the freeholder. Whilst it is quite common for properties to be held on a long leasehold title, leases can sometimes contain provisions that require permission from the freeholder to carry out matters such as structural alterations to the property.
Victoria Marshall, Head of Residential Conveyancing for Pearson Solicitors and Financial Advisers explains, “Normally when a leasehold house is sold, a lease is granted for a fixed period of time. This can be anything between 99 and 999+ years. In the North West 999 years are common and therefore we see very few problems however newer properties and those purchased under the right to buy scheme tend to be subject to much shorter leases which, once they get below a certain number of years, are unacceptable to lenders and significantly reduce the value of properties. There are statutory provisions to allow leaseholders to extend their lease or even purchase the freehold outright but this can be complicated and requires specialist advice.”
The new proposals by the government include:-
- A government calculator which will provide a clear basis for the calculation of the amount payable to the freeholder to purchase the freehold or extend the Lease
- The ability to extend a Lease for 990 years with no ground rent payable
- Eradicate ‘marriage value’ from the calculation – this increased the value of a lease extension for a leaseholder
“This is great news for leaseholders. The earlier reforms saw a lot of developers willing to amend their leases to remove the unfair doubling of ground rents, but this is another step towards creating a fair and transparent system for homeowners.” adds Victoria.
At Pearson Solicitors and Financial Advisers we have specialist conveyancing solicitors in Oldham, Ashton and North Manchester who are experienced in advising clients on all property matters.Subscribe to our newsletter
Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.
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