Leasehold Reform: Lease Extensions And Commonhold

• Published date: 21 January 2021
• Subject Matter: Employment and HR, Real Estate and Construction, Retirement, Superannuation & Pensions, Real Estate
• Law Firm: Birketts
• Author: Mr Clive Adams and Elena-Lucia Singleton

On 7 January 2021, the Housing Secretary announced plans for new legislation to make it easier and cheaper for leaseholders to buy their homes and to prepare homeowners and the housing market for the widespread take-up of commonhold.

The keys points of the government's announcement are:

• Introducing a statutory right to extend a lease for 990 years at zero ground rent, available to existing leaseholders of both flats and houses, including new retirement leasehold properties
• Abolishing the concept of 'marriage value'. This is compensation payable under the current law intended to compensate the freeholder for not getting the lease back at the expiry of the original term. It often proves to be the barrier for lease extensions as the fewer years that are remaining on the original term, the more 'marriage value' has to be paid to the freeholder to extend the lease. Removing this barrier to lease extensions and setting 'calculation rates' via an on-line calculator will ensure that the lease extension process becomes fairer, cheaper and more transparent
• Enabling leaseholders to voluntarily agree to a restriction on future development of their property in order to avoid paying 'development value'
• Establishing a Commonhold Council - a partnership of leasehold groups, industry and government - to prepare homeowners and the market for the increased drive towards the commonhold model. The concept of 'commonhold' was introduced under the Commonhold and Leasehold Reform Act 2002 but has not proved particularly popular. No doubt the Government considers...