Being hailed as the first part of the biggest English property law reform in decades, the announcement of new ground rent legislation is set to extensively change the residential property market. Steven Glover, co-founder and land & sales director of developer Consero, helps explain the changes and what it means to leaseholders.
Glover says a freeholder owns both the property and the land it stands on while leaseholders only own the property. Previously, leaseholders of flats could extend their lease most often at a zero ‘peppercorn’ ground rent, but usually only for 90 years and could be charged extensively to do so. House owners also faced barriers and high costs when trying to extend their leases.
According to Glover, the new reforms aim to accelerate the phasing out of ground rent in England in the following ways:
In addition, ground rents will also be reduced to zero for all new retirement properties, so purchasers of these homes have the same rights as other homeowners.
Leasehold homes will not be able to be sold by developers under the Help to Buy scheme unless ground rent on them is peppercorn or zero. Many developers are also applying the same lease terms to properties sold outside of Help to Buy.
In the future, Glover says there will also be caps on ground rent and set calculation rates to ensure the process is more transparent, fairer and cheaper and an online calculator will be introduced to make it easier.
A Commonhold Council, which is expected to be a partnership initiative made up of leasehold groups, representatives from the industry and the government, will be set up to ensure the changes run smoothly.
“The advantages to the changes will be to make home ownership cheaper, less bureaucratic and fairer by stopping freeholders increasing ground rent with no benefit to the leaseholders,” Glover explained.
“Leaseholders will also be able to buy a freehold more cheaply. Some freeholders over time have been able to abuse the system so the changes will offer home buyers more security.”
He added: “If changes are made in the future to include all residential properties, rather than just new builds, it will make more homes with shorter leases much more of an attractive buy as opposed to being a barrier to an attractive sale.”
Consero insists it will not be charging ground rent at any of its developments including Woking development Britannia Wharf, which comprises 52 canal-side apartments, and Heathbourne Village, a residential development of 41 homes in Bushey Heath set within a gated private estate. Every buyer will be offered an equal share of the freehold.
Source: Property Investor Today