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Kate Clouston Global Relationship...
Rocco Cecere Of Counsel

UK update on residential leasehold property

The UK Government has just published its much anticipated reform of the law relating to residential leasehold property. Whilst the proposals are not yet law, we can be fairly confident that the changes will be introduced in the coming year as part of the Government's pledge to end unfair leasehold practices. The proposals include:

  • £0 ground rents: Landlords will not be permitted to charge a ground rent, protecting tenants from being charged excessive rents. Escalating ground rents currently result in many tenants facing challenges to sell or re-mortgage their property.
  • Faster response times from landlords on sale: The Government has reacted to claims that landlords and managing agents cause delays on sales and charge excessive fees. In news that will be music to conveyancers' ears throughout the country, the Government will introduce a 15 working days time limit within which Landlords must reply to enquiries. Fees will be capped at £200 (rather than £500 or more which we often see).
  • The end of leasehold houses: The sale of new build houses with leasehold tenure has increasingly become prevalent, with some developers using it as cash cow. The Government want to draw a line under this practice, requiring all new build houses to be sold as freehold.
  • Commonhold: The Government is going to have another go at introducing Commonhold title, which effectively allows the freehold ownership of individual flats or units in a building. Unlike leasehold, there is no limit on how long you can own the property for and the common areas are managed jointly by the flat owners - alleviating the need for external management. It remains to be seen whether in the absence of hundreds of years of common law whether buyers, and perhaps more importantly lenders, have confidence in the new form of title.
  • Leasehold enfranchisement: Repeated responses to the 2018 consultations found leaseholders complaining about the costliness and complexity of the process. The Government's objectives for enfranchisement reform are to simplify the legislation, reduce the cost of the process, and to ensure the process is quicker and more accessible.

There's been a great deal of publicity surrounding inappropriate ground rents being levied by developers, and we expect the reforms to be well received by most. With Brexit still driving the agenda, it is likely that the reforms will appear on the statute books in 2020.

Although the reforms will not immediately benefit leaseholders already holding leases, with particularly onerous terms, the improvements to legislation on commonhold and leasehold enfranchisement will offer them solutions and protection. The effects of the reform will be gradual and it's unlikely that ground rents will be axed overnight but the Government has expressed that this is just the first step in addressing much wider issues in this space.

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