UK Markets open in 5 hrs 51 mins

Government vows to end 'rip-off' leasehold costs for homeowners

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
Tom Belger
·Finance and policy reporter
·3-min read
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
New apartment blocks at Salford Quays in Manchester, UK. (Photo by Ashley Cooper/Construction Photography/Avalon/Getty Images)
New apartment blocks at Salford Quays in Manchester, UK. Photo: Ashley Cooper/Construction Photography/Avalon/Getty

The UK government is set to ban ground rent and tackle other “unfair” costs for homeowners across England, in what it called the biggest shakeup of leasehold law in a generation.

Housing secretary Robert Jenrick said millions of leaseholders would be able to extend their lease by up to 990 years at zero ground rent, saving them thousands of pounds.

Around 4.5 million homeowners in England only own their property on a leasehold basis, meaning they have effectively bought the right to it for decades or centuries rather than owning the land outright.

The government said in a press release that ground rents, often levied by freeholders on leaseholders, “can make it feel like [leaseholders] are paying rent on a property they own.”

Freeholders are able to increase ground rent under current law with “little or not benefit” to leaseholders, according to the ministry of housing, communities and local government. Some are forced to pay significant sums and higher ground rent when extending their leases, often when the lease runs below 80 years.

“Today’s changes will mean that any leaseholder who chooses to extend their lease on their home will no longer pay any ground rent to the freeholder, enabling those who dream of fully owning their home to do so without cumbersome bureaucracy and additional, unnecessary and unfair expenses,” said the department.

WATCH: Why are house prices rising during a recession?

READ MORE: UK building firms start hiring again as demand holds up despite lockdowns

Current rules allow flat leaseholders to extend their lease by 90 years and limit freeholders’ ability to charge any ground rent as part of the deal. But leaseholders of houses can still see ground rent added, and only extend their lease once for 50 years.

Legislation will be brought forward for the latest reforms, which will allow leaseholders of both kinds of properties to extend their lease by 990 years at zero ground rent.

Meanwhile other reforms promised on Thursday include:

  • An online calculator will be created to show leaseholders how much it will cost them to extend their lease or buy the freehold.

  • Certain prohibitive costs will be scrapped, such as the so-called “marriage value.”

  • Owners of retirement leasehold properties will be protected from “uncertain and rip-off practices,” with ground rents cut to zero for new leases.

  • A new partnership will be set up called the Commonhold Council, seeking to boost take-up of little-used commonhold ownership. It allows flat owners to take up joint ownership of a building with other flat owners.

The government ordered a review of leasehold law in 2017, and is embarking on a wider shakeup of the system. A ban on new ground rent will be brought forward “in the upcoming session of parliament,” with other forms to follow “in due course,” according to the department.

Leasehold Knowledge Partnership, a charity campaigning for leaseholders, welcomed the decision to prioritise the ban before tackling other more complex legislation that could take longer to thrash out.

“New ground rents are simply to be banned, with no exception, and once that happens the entire edifice of rip-off leasehold crumbles. Banning ground rents deprives this racket of a future, which is a massive change. Our hugely subsidised PLC housebuilders were already abandoning ground rents as quietly as possible,” said the group’s CEO Sebastian O’Kelly.

WATCH: What is shared ownership?