Leaseholders in limbo are still waiting

Now that the Leasehold Reform (Ground Rent) Bill has passed its third reading, the question is no longer if the government will be introducing changes to leasehold legislation but rather when.

When the bill becomes law, it will restrict ground rents on new build leasehold homes. As a result, owners of these properties will no longer have to suffer financially as a result of costly doubling ground rent clauses.

The new legislation limiting new ground rents to a token, or “peppercorn”, amount marks the start of what the government has said will be a two-part legislative process.

The government has pledged to bring in further legislation to support leaseholders. This will include enabling those with existing long leases to buy out the ground rents on their properties without having to extend the lease terms, and giving leaseholders of flats and houses the right to extend their lease agreements for a term of 990 years.

Little comfort

However, this will be of little comfort to leaseholders presently living in flats that are unmortgageable or unsellable because of factors such as short leases, extortionate service charges, or rising ground rent clauses that predate the bill being added to the statute book.

These leaseholders are still living in limbo, with no definite dates for the further legislative changes that could make it easier for them to sell their homes and move on with their lives.

The extent of concern among professionals about this situation is such that an open letter has been sent to Michael Gove, the Secretary of State for Levelling Up, Housing and Communities by the Legal Sector Group, calling on him to bring into law as soon as possible improvements to leasehold law that have been announced or supported by the government in recent years.

Signatories to the letter include the Conveyancing Association (CA), The Society of Licensed Conveyancers (SLC), the Property Redress Scheme, the Intermediary Mortgage Lenders Association (IMLA), PropertyMark, and the Guild of Property Professionals.

Research undertaken

The letter pointed out:

“The research undertaken by, and on behalf of, the government has delivered generally non-contentious recommendations many of which the government has publicly supported.

“However, without the legislation to deliver the improvements, consumers continue to be impacted by the exploitation of their homes by third parties.”

The reality is that even if the government does move quickly to bring in further changes to leasehold laws, uncertainty over timescales involved will mean many leaseholders will be unwilling or unable to continue waiting.

These leaseholders will be prepared to invest in engaging a conveyancing lawyer specialising in leasehold enfranchisement, who can advise upon statutory solutions that can help to free them from their current state of stasis.

Potential purchasers

The solutions recommended to these clients will vary depending upon the particular problem that is making their property unattractive to potential purchasers or mortgage providers, such as a leasehold with very little time left on it, or a rising ground rent.

For some, the most effective approach will be to buy out the freehold entirely, thereby becoming their own landlord for their leasehold flat.

Others would be best advised to extend their lease by an additional 90 years for a flat or 50 years for a house.

The average statutory transaction takes between three and six months from start to finish. Although this inevitably varies depending upon the complexities involved in each case, it does provide leaseholders with a timescale that they can work to, and means they can move on with their lives instead of waiting for new legislation to be introduced by the government.

Leasehold enfranchisement enables property owners whose lives are being impacted by their leaseholds and ground rents to take control of their situations, and enhance the appeal and also the value of their property.

With future legislation on leasehold reform appearing to be so close but yet so far for those leaseholders whose lives are on hold, leasehold enfranchisement can offer an effective solution.

Jonathan Frankel is litigation partner at Cavendish Legal Group, which is part of the ONP Group.

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