by Innovus on 2 May 2024
The leasehold system in England and Wales is undergoing its biggest shakeup in decades with the new Leasehold Reform Act, part of the Building Safety Act 2022. The reforms aim to make being a leaseholder much fairer and more affordable by changing the rules around lease extensions, ground rents, service charges, and buying the freehold.
For too long, leaseholders have faced excessive costs to extend their leases, punitive ground rents that doubled every 10-15 years, and opaque service charges controlled by unregulated managing agents. The new laws aim to rebalance the scales in favor of leaseholders.
Changes to Lease Extensions
One of the biggest wins for leaseholders is the increase in the standard lease extension term from 90 years to 990 years, effectively making any newly extended lease almost indefinite. Leaseholders will also no longer have to pay the obscure “marriage value” premium to their freeholder, saving thousands of pounds.
Even better, any lease extended under the new rules will be set to a peppercorn ground rent, which is legally zero pounds per year. This abolishes the costly and increasingly unaffordable ground rents that loaded massive future liabilities onto leasehold homeowners.
Leaseholders pursuing a lease extension will also be able escape their freeholder’s legal costs in the process, removing another major expense barrier.
Ground Rent Reforms
As well as setting future ground rents to zero via extended leases, the new laws also create mechanisms for existing leaseholders to apply to extend their lease to a peppercorn ground rent if desired.
Crucially, no new leasehold houses or flats will be allowed to be created with a ground rent, other than in exceptional circumstances. This should prevent new homeowners being locked into the leasehold system with all its problems.
Service Charge Changes
Reforms are being made to service charge rules, which cover leaseholders’ contributions to building insurance, maintenance, repairs, management fees and more. Key changes:
- Greater transparency will be required by landlords and managing agents on service charge costs and how they are calculated
- Statutory regulation of managing agents to improve their conduct
- Government loans will be made available to leaseholders to cover upfront costs of cladding/fire safety remediation on their building
Additionally, the Act makes managing agents associate members of professional bodies, introducing minimum standards of practice.
Enfranchisement and Freehold Reform
The new laws also make it easier and cheaper for groups of leaseholders to collectively purchase the freehold of their building and take control from external landlords. Previously very complex, this “enfranchisement” process should become more streamlined.
For the first time, leaseholders of houses as well as flats will be able to enfranchise more easily. Commercial leasehold premises are also covered by the freehold purchase reforms.
Next Steps for Leaseholders
The majority of the leasehold reforms are set to come into force over the next 12-18 months. During this time, leaseholders with shorter leases under 80 years may want to seriously consider extending their lease or purchasing the freehold under the new, more favourable rules.
However, the valuation process and legal procedures involved can still be complex. This is where experienced leasehold professionals can help leaseholders get the best deal and ensure they comply with all requirements.
The Experts at Innovus Can Guide Your Leasehold Journey
The leasehold reform laws are bringing welcome change, but navigating them requires knowledge and expertise. The team at Innovus are leasehold enfranchisement and extension specialists, having helped thousands of leaseholders realise their property goals.
From conducting valuations and negotiations with your freeholder, to managing the legal process of a lease extension or freehold purchase, Innovus can ensure you take full advantage of the new laws while avoiding costly missteps.
Don’t go it alone – contact Innovus today for a free consultation on your leasehold situation and how their professional services can maximise the benefits of leasehold reform for you.
By working with Innovus’s experienced surveyors, valuers and solicitors, you can feel confident you’re getting the best deal possible under the latest leasehold legislation. Futureproof your property investment by getting Innovus on your side.
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