★★★★★

Rated Excellent

UK Property Finance

★★★★★

Rated Excellent

open 7 days

End to Complex Leasehold Costs Promised by the Government

by | Feb 8, 2021 | Other Finance News

The British government has announced plans to overhaul England’s controversial and highly criticised leasehold system in order to eliminate the excessive costs homeowners often face when extending a lease.

In particular, owners of former council properties who purchased their homes in the 1980s are likely to benefit from the planned reforms, which, according to estimates, could save up to four million homeowners across the UK thousands of pounds.

But while the proposed protections for leaseholders have been welcomed by many, some experts have suggested that those who have already paid excessive fees and charges over the years should be provided with a refund and appropriate compensation.

Amendments to the system

Many properties across the United Kingdom continue to be sold on a leasehold basis, wherein a lease on the property is granted by the freeholder for a specific period of time. This period of time usually ranges from 99 years to 125 years but can be as long as 999 years.

This therefore means that when the property is purchased on a leasehold basis, the buyer does not in fact gain outright ownership of it. They simply purchase the entitlement to occupy the property for a set period of time. After which, they have the option of applying to their freeholder for a lease extension, which they are expected to pay for.

One of the factors used to calculate these extension fees is the ‘marriage value’ of the property, which refers to the property’s increase when the lease extension is granted. Following recommendations by the Law Commission, this marriage value fee system is set to be abolished to improve transparency and affordability for those applying for lease extensions.

“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,” commented Housing Secretary Robert Jenrick.

The announcement of the new legislation was welcomed in general by the Leasehold Knowledge Partnership, though some have already said that the new protections do not go far enough and further clarification should be provided on how the new legislation will benefit all leasehold property owners.

Zero ground rent

One important aspect of the policy overhaul will be that leaseholders will be able to apply for lease extensions of 990 years to ensure they do not run into major difficulties when selling their properties.

When a home is fast approaching the end of its lease, it can be extremely difficult to sell as the subsequent buyer would be forced to pay the appropriate costs to extend the lease.

 

Developers remain adamant that the leasehold system in its current form is fair and effective for most people, but the government has again stated that zero ground rent should apply to all new leasehold properties.

“While we welcome the government’s initiative to reduce ground rents to zero for all new retirement properties, we would argue this needs to be extended to all retirement properties to create a level playing field,” said Propertymark chief policy adviser Mark Hayward.

Recent Posts

Right-to-Buy Mortgages: Turning Your Council Home Into Your Own

For many council tenants in England, the dream of owning their home is closer than they might think, thanks to the Right-to-Buy scheme. Introduced in the 1980s under the Housing Act, this government initiative allows eligible tenants to purchase their council home at...

Owner-Occupied vs. Investment Properties: Choosing the Right Commercial Finance Option

Are you a business owner looking to purchase commercial property in the UK? Whether you’re planning to occupy the space yourself or invest in a property for rental income, choosing the right financing option is crucial. In this blog post, we’ll explore the key...

Residential vs. Commercial Mortgages: Key Differences Every Borrower Should Know

When it comes to financing property in the UK, whether you’re purchasing your dream home or investing in a business premises, the type of mortgage you get will shape your financial commitments for years to come. In this blog post, we’ll compare residential and...

Using a Secured Loan to Raise a Deposit for Your Next Property Purchase

Purchasing a new property can be an exciting milestone, but one of the biggest hurdles is often coming up with a sufficient deposit. For many, a secured loan offers a viable route to bridge that gap. In this post, we will explore how secured loans work, the benefits...

Understanding Interest Rates and Loan Terms Through Calculators

Navigating the world of loans in the UK can feel overwhelming, especially when faced with various finance options and complex interest calculations. Fortunately, loan calculators are available for different options such as secured loans, bridging loans, development...

Key Housing Market Predictions for 2025

As we step into 2025, the UK housing market is poised for notable changes, particularly concerning mortgage rates. Recent analysis suggests a favourable shift for prospective homeowners and investors. Projected decline in mortgage rates The consumer body Which?...

How a Secured Loan Calculator Can Help You Make Smarter Financial Decisions

When contemplating a secured loan, the financial risks can be significant. Whether you're planning a home renovation, consolidating debt, or purchasing a vehicle, understanding your borrowing power and repayment terms is crucial. A secured loan calculator is a...

What is the Normal Completion Time for a House Sale, and Can Bridging Finance Speed It Up?

When buying or selling a property, one of the key milestones is the completion date, the day when the sale is finalised and ownership is transferred. However, many people are unsure about the typical completion time for a house sale and how they can potentially speed...

UK House Prices Rise to a New All-Time High as Mortgage Rates Fall

The average London price increased 3.5% to £543,308, its highest since November 2022, when it was £545,568. Falling mortgage rates have driven house prices to a new all-time high, according to fresh data from big lender Halifax released today. The average price of a...

House Prices to Rise in 2025 as Buyers Could Get Bigger Mortgages

One mortgage provider predicts that house prices might climb dramatically next year since declining interest rates will increase buyers' borrowing capacity. Based on latest data from the Office for National Statistics, MPowered Mortgages projects a significant...

Categories