{"id":44693,"date":"2018-07-19T13:36:58","date_gmt":"2018-07-19T13:36:58","guid":{"rendered":"https:\/\/dominiclevent.com\/blog\/?p=44693"},"modified":"2019-04-17T17:12:58","modified_gmt":"2019-04-17T17:12:58","slug":"radical-plans-to-end-huge-costs-of-buying-a-freehold-unveiled","status":"publish","type":"post","link":"https:\/\/dominiclevent.com\/blog\/radical-plans-to-end-huge-costs-of-buying-a-freehold-unveiled\/","title":{"rendered":"Radical plans to end huge costs of buying a freehold unveiled"},"content":{"rendered":"


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Millions of homeowners caught in the so-called \u201cleasehold trap\u201d may be able to buy their freeholds at a fraction of the price currently demanded by ground rent companies, under radical proposals from the Law Commission.<\/p>\n

One proposal is for a simple formula where leaseholders will pay just 10 times their current ground rent to convert their property from leasehold to freehold.
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There are 4.2m leasehold properties in England<\/a>, and around half are on leases of under 80 years, leaving residents vulnerable to what critics say are rapacious demands from freeholders for lease extensions.
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The Law Commission was asked by then communities secretary Sajid Javid in December 2017 to find ways to make buying out a lease \u201cmuch easier, faster and cheaper\u201d.<\/a> In its response, the Law Commission, an independent legal body<\/a>, on Thursday sets out two options for reform. The first is a formula that \u201ccould be based on ten times the ground rent\u201d or \u201c10% of the value of the property\u201d, saying that any new rules must reduce the current cost for leaseholders. It added that a simple formula had the benefit of being easily understood and would reduce legal costs.<\/p>\n

With ground rents averaging around \u00a3370 a year, that suggests a cost of \u00a33,700 \u2013 far less than the \u00a310,000 to \u00a340,000 typically sought from a leaseholder for a flat valued at \u00a3200,000 with fewer than 80 years left on the lease.<\/p>\n

Its second option is to standardise the existing regime for leasehold valuations, removing a complicated element called \u201cmarriage value\u201d that it said currently increases the cost paid by leaseholders. <\/p>\n

The Law Commission also proposed new formulas for leaseholders who extend their lease rather than buying the freehold. It suggested that they could have a right to extend the lease for up to 250 years, and no longer have to pay ground rents. <\/p>\n

The Law Commission said proposals were only at an outline stage, and that a full consultation document would not be published until the autumn, with new rules unlikely until summer 2019.<\/p>\n

Any changes to the calculation of leasehold extensions is likely to meet fierce resistance from freeholders, with the fortunes of Britain\u2019s wealthiest aristocrats, such as the Duke of Westminster, rooted in lucrative leasehold property estates<\/a> in central London.<\/p>\n

A legal challenge <\/a>to existing leasehold valuations \u2013 which estimated that leaseholders were overpaying by hundreds of millions of pounds every year \u2013 was rejected by the Court of Appeal<\/a> earlier this year. <\/p>\n

The Law Commission said it would have to ensure that \u201csufficient compensation\u201d was paid to landlords. \u201cAny changes to the law that government takes forward will have to comply with human rights legislation and take account of the impact of reform.<\/p>\n

\u201cAnd while some changes \u2013 in particular the options that we have been asked to present to reduce the premium payable by leaseholders \u2013 will inevitably benefit leaseholders at the expense of landlords, that is not the case across the board.\u201d<\/p>\n

Campaigners for leasehold reform, who demonstrated outside parliament on Wednesday, welcomed the proposals. Sebastian O\u2019Kelly of the Leasehold<\/a> Knowledge Partnership said: \u201cLease extension and enfranchisement \u2013 the buying of the freehold \u2013 are two highly lucrative rackets.<\/p>\n

\u201cThe mathematical formulae agreed by the courts were obligingly provided by estate agents for the richest freehold owners in the country. The only way to end this racket is a fixed formula of annual multiples of ground rent, as exists in Northern Ireland and Scotland, then your home is truly yours.\u201d<\/p>\n

Around one in five new-build houses in recent years \u2013 and almost every flat \u2013 have been sold as leasehold, some with spiralling ground rents that have made selling them near impossible<\/a>.<\/p>\n<\/div>\n


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Millions of homeowners caught in the so-called \u201cleasehold trap\u201d may be able to buy their freeholds at a fraction of the price currently demanded by ground rent companies, under radical proposals from the Law Commission. One proposal is for a simple formula where leaseholders will pay just 10 times their current ground rent to convert … <\/p>\n

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