New Leasehold Reform

Posted by Glenny on 21st January 2021 -

Caroline Puxley, Survey at Glenny LLP, comments: "The Housing Secretary, Robert Jenrick, has announced that millions of leaseholders will soon be given the right to extend their lease by 990 years with ground rent reduced to zero.

"This change to English property law will be part of the biggest reforms for 40 years, fundamentally making home ownership fairer and more secure for leaseholders across the country.

"Currently, the statutory obligation under a Section 42 notice entitles the leaseholder to an additional 90 years on top of their remaining lease term, and the reduction of their ground rent to zero.

"When leases fall below 80 years a large proportion of the sum payable to freeholders is from ‘Marriage Value’. It is proposed that this element will no longer be payable to the freeholder which is likely to make the cost of lease extension much more affordable. The government have also proposed that they will set the calculation rates to ensure this is fairer, cheaper, and more transparent to the leaseholder and provide additional security in the form of a 990 year lease extension at zero ground rent.

"Leaseholders with less than 80 years remaining on their lease look set to become the greatest beneficiaries when the changes become law.

"The proposed reforms have been a long time coming and while there are still areas to be clarified, we are of the opinion that property which has had a 990 year lease extension will be more attractive to buyers in terms of maintaining value and providing security of tenure.  

"It is likely that the reforms will be brought forward in Parliament over the next few months and will enjoy cross party support in the house. Once in place, we expect a rush of leaseholder property owners with fewer than 80 years remaining on their lease to extend their lease to the maximum term."

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