Proposed Government Reforms for Residential Leaseholders

On Thursday 7^th January 2020, Robert Jenrick, the Housing Communities and Local Government Secretary announced proposals to reform leasehold housing.

At this stage, we have no further details other than those released in his statement.   

https://www.gov.uk/government/news/government-reforms-make-it-easier-and-cheaper-for-leaseholders-to-buy-their-homes

The measures come as part of one of the biggest reforms to English property law for forty years, which are primarily intended to make home ownership fairer and more secure.  

We understand that the proposals will involve:

• Giving leaseholders the right to extend their lease to a maximum term of 990 years at zero ground rent (subject to payment of a premium)
• The abolition of marriage value
• Protecting the elderly by reducing ground rents to zero for all new retirement properties
• Establishing a Commonhold Council - a partnership of leasehold groups, industry and government that will prepare homeowners and the market for the widespread take-up of commonhold 

The Government hopes the changes will save leasehold homeowners hundreds to tens of thousands of pounds.  However, the proposal to remove marriage value is controversial and could well be met by a challenge from Landlords under Human Rights legislation or similar.

There is also talk of a new online calculator intended to simplify the valuation and reduce scope for disagreement. Although no details have been made available yet, we expect any such calculator can only be effective in respect of simpler low value claims, and higher value or more complex claims will still require professional advice.

Consequently there is plenty of speculation about what the Government will do, and how they can avoid a large and costly challenge in the Courts if they abolish marriage value, the effect of which (if unchecked) would be a substantial and one-sided boost to the value of the tenant’s lease.  One option might be to prescribe deferment rates, but whether this will be done remains to be seen.

The timing of the changes is still uncertain.  What is known at the moment is that the legislation is expected to come in two parts, the first in the upcoming session of Parliament will set future ground rents to zero in all new leases, but not existing ones.  The other changes have no timetable at the moment, and the initial view of legal practitioners is that the complexity of the proposed changes means it may still be years before they become law. 

Given this, our view is that little radical change is likely to happen soon.  Nevertheless, if you would like to discuss the Government’s proposals further, and how they might affect your plans, please do not hesitate to contact us.