Many homeowners and landlords will long have been aware of changes being made to leasehold regulations. The Leasehold and Freehold Reform Bill became law on 24 May this year, bringing significant reform to the way that leases and freeholds operate. Sarah Ellis, a Chartered Legal Executive from Sintons, gives an overview of the changes and how they could affect you.
Over the last year, a lot of our clients have been asking questions about the proposed changes to leasehold laws. We’ve known since 2019 that the government was planning new laws, and the Leasehold and Freehold Reform Bill has now been passed.
Even though the bill has received royal assent, it’s still not fully in force and many details are still to be confirmed. However, we do know some of the changes that are in the pipeline for the people who own and occupy the nearly 5 million leasehold properties in England.
Benefits for homeowners
The sole purpose of the Act is to provide a much more reasonable market for homeowners. It will bring a number of benefits, including the removal of the requirement for people to have owned their house or flat for two years before they are able to extend their lease or buy their freehold.
The sale of new leasehold houses will be banned, save for a handful of permitted exceptions – so most new houses sold will be freehold. And the act will make it simpler for people to challenge poor landlords and managing agents and to challenge unreasonable charges.
Something a lot of homeowners will have heard about is the fact that standard lease extension terms will be increased to 990 years for both houses and flats. Currently, the standard term is 50 years for houses and 90 years for flats. The new, longer term means people will not have to renew leases as often, saving time and money and avoiding delays or complications with sales, purchases and remortgages.
It will also be cheaper to extend a lease or purchase a freehold. This will partly be due to the abolition of ‘marriage value’ – the amount that is currently paid to a landlord or freeholder when a lease is extended, after dropping below 80 years. This can total tens of thousands of pounds, so not having to pay it will be a huge benefit for homeowners.
In addition, certain leaseholders will have the right to vary their long leases so the rent becomes and will remain a peppercorn.
Should you wait to extend your lease?
If you are currently considering whether or not you should wait to extend your lease this really depends on your future plans.
If your lease term is less than 80 years and you wish to mortgage or sell your property in the near future you may not have a choice but to extend the term, as short leases are not accepted by the majority of lenders.
These changes will be welcomed by many people, but there is still some time to wait until the benefits are seen and you should bear this in mind when making decisions.
At Sintons, we always advise our clients to liaise with a specialist leasehold valuer, who is trained in assessing premiums, to decide whether it will be more cost effective extend your lease now, or to wait for the new Act to be implemented.
Sarah Ellis is part of the specialist residential conveyancing team at Sintons.
Find out more at www.sintons.co.uk