The Government announced their plans for leasehold reform in 2017 and as of the 30th June 2022, those reforms have started to take effect.
Leasehold
properties are often thought of as a greater hassle to own than a freehold. This is partly because there often requirements to pay a landlord service charge for the maintenance of the building and other services, ground rent ‘to rent’ the land that the property sits on and rules and regulations contained in the lease that need to be followed.
Whilst service charges and leasehold covenants remain unchanged, the latest legislation means that the majority of new residential long leases are not allowed to include a requirement to pay ground rent to the landlord.
Instead the landlord can only charge a ‘peppercorn’ rent which is a historic way of saying a token payment with no financial value. Landlords are also prohibited from charging any admin charges associated with collecting the peppercorn rent.
What are
the requirements?
Generally, a new lease will be covered by the reforms where the lease is;
· A long lease (21 years or more) of a single dwelling
· Granted after 30th June 2022
· Granted for a premium – i.e. you pay the landlord a price in return for the lease
· Not otherwise excluded
What are
the exceptions?
· If you exchanged contracts on the purchase of a new leasehold property prior to the 30th June 2022, even if completion will take place after, the lease is not covered by the changes.
· Shared ownership properties where rent is paid to the landlord for the share that that the landlord owns;
· Retirement properties – they will be covered by the act from 1st April 2023.
· Leases of community housing, certain financial products and business leases.
· Voluntary and non-statutory lease extensions – these can retain the existing ground rent unless negotiated between the leaseholder and the landlord.
According to Minister, Eddie Hughes, the second stage of the reforms will be ‘supercharging leaseholder’s ability to buy their freeholds, helping millions genuinely own their own home’ so watch this space.
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