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Coming Soon – Leasehold Reform

Published: 28/01/2021

It’s about to become much faster and cheaper to buy a freehold or extend a lease. Housing Secretary Robert Jenrick recently announced that the government is pushing ahead with widespread reform to leaseholds, including proposed legislation to ban leasehold houses, abolish ground rents and introduce commonhold tenure. Leaseholders will be able to extend their lease to 990 years with no ground rent charges, the arcane ‘marriage value’ used in the calculation of freehold purchase and lease extension will be abolished, and the government will publish an online calculator making it much easier to work out the cost.

This radical shake-up will potentially benefit the 4.5 million leaseholders in England, although in practice those in large blocks with numerous individual flats may find it difficult to get together to buy the freehold. Perhaps the proposed new ‘commonhold’ tenure, giving leaseholders joint ownership of their freehold, will address this. The government certainly expects this tenure type to become popular, and is currently setting up a Commonhold Council ‘to prepare homeowners and the market for the widespread take-up’. How this will work is unclear.

Leasehold property in England has its origins in feudalism. In the Middle Ages the Crown granted land to nobles in exchange for military service, and in turn the aristocracy leased land to serfs for a fixed period of time, whilst retaining the freehold ownership. The modern leasehold system evolved in response to rent controls which were initially introduced in 1915 to prevent wartime profiteering. These controls waxed and waned during the 20th century, before being largely abolished by deregulation in 1989. Over the same timeframe leasehold became the norm for flats, which are typically sold with a 99 or 125 year lease. Leasehold houses are a newer phenomenon, and one that has become very unpopular.