Leaseholders in England and Wales get new ground rent rights

Homeowners can now extend their leases for 990 years without having to pay ground rent.

Leaseholders in England and Wales will have the right to extend their lease for up to 990 years and pay no ground rent under significant changes that the government says would save some households tens of thousands of pounds and make homeownership was “fairer and safer.”

The changes follow a protest several years ago when it emerged that some flats and houses had been sold with clauses that meant that land rents would rise dramatically in later years.

Around 4.5 million households own their homes on a lease basis and pay annual ground rent to the property’s freeholder, often an investment company, who, through the lease, grants the right from the owner to live there.

They are typically set at a low “peppercorn” rate, but clauses in some new developments stated that rents would double every ten years, making some homes non-mortgaged and homeowners unable to move in and face expensive bills.

Currently, leaseholders can only extend their 50-year lease once and pay land rent. At the same time, apartment owners can do it multiple times with a 90-year pepper rental.

Under the reforms, which were recommended by the Law Commission, both can be extended up to 990 years with zero land rent, and all new retiree properties will be sold without a ground rent.

Extending a lease has a cost, but the government said it would change how they were calculated, including eliminating costs like “marriage value,” which forces the tenant to share a potential gain from the extension with the landlord.

“We want to help the leaseholders and make things fair for them.”

Housing Secretary Robert Jenrick said: “Across the country, people are struggling to realize the dream of owning their own home, but are finding the reality of being a renter too bureaucratic, burdensome and expensive.”

“We want to strengthen the security that homeownership provides by forever changing the way we are homeowners and ending some of the worst practices that homeowners face.”

The Law Commission also proposed adopting common property as the preferred type of property for new construction, and the government said it was creating a council to “prepare homeowners and the market for [its] widespread acceptance.”

Under this model, which is popular in other parts of the world but has been used in fewer than 20 developments in England and Wales, the blocks are jointly owned and operated. The flats can be wholly owned.

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