Millions of leaseholders to save thousands of pounds | moneyfacts.co.uk

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Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 05/02/2021

Millions of leaseholders will now be able to extend their lease by 990 years at zero ground rent, marking the biggest change in English property law for 40 years. This change means leaseholders who choose to extend their lease will no longer pay ground rent to the freeholder. This gives security and reduces costs for those living in a leasehold property.

What is the difference between a freehold and leasehold?

A freeholder owns a property outright including the land it is built upon. A leasehold gives the leaseholder the right to live and use the property for the set period of the lease. Leaseholders usually must obtain permission from the freehold owner to make any changes to their property.
A property lease is usually granted for between 99 and 999 years. Leaseholders can choose to extend or buy the freehold, but this is a complicated process and will involve legal fees. Some leaseholders also face ground rent fees as well. This is different to service charges which usually cover a landlord’s costs for maintenance and services provided as part of a building.

Why are ground rent rules changing?

The current rules allow leaseholders of flats to extend their lease as often as they want but usually up to 90 years only. Leasehold owners of houses could only extend their lease once for 50 years. Both house and flat leaseholders that choose to extend their lease will then need to pay a ground rent.The new rules will change this so leaseholders of houses and flats can extend their lease to 990 years without having to pay a ground rent.

Changes to retirement leaseholds

The Government has set out that new leases will have a zero-ground rent and this will now be extended to those purchasing retirement leasehold properties. This will help to avoid rip-off practices that included escalating ground rents at set intervals.


Housing Secretary Rt Hon Robert Jenrick MP said:
“Across the country people are struggling to realise the dream of owning their own home but find the reality of being a leaseholder far too bureaucratic, burdensome and expensive.


We want to reinforce the security that home ownership brings by changing forever the way we own homes and end some of the worst practices faced by homeowners.
These reforms provide fairness for 4.5 million leaseholders and chart a course to a new system altogether.”

How does a longer lease help leaseholders?

Properties with a lease of 80 years or less are usually harder to mortgage and as a result the property is less attractive on the market. A high ground rent only compounds this further by adding another expense and reducing mortgage affordability compared to a freehold property.


Those considering buying a property with a short lease should discuss this with a mortgage broker to check the availability and cost of finance and use a conveyancing solicitor to check the details.

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