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Leasehold: Reform

Question for Ministry of Housing, Communities and Local Government

UIN HL776, tabled on 7 June 2021

To ask Her Majesty's Government when they plan to reform the law in respect of existing leasehold arrangements.

Answered on

21 June 2021

The Government is committed to promoting fairness and transparency for homeowners and ensuring that consumers are protected from abuse and poor service. We are taking forward a comprehensive programme of reform to end unfair practices in the leasehold market.

Under the current system, too many existing leaseholders find the process for extending their lease or buying their freehold (a process known as enfranchisement) too complex, lacking transparency and prohibitively expensive.

We will reform the process of enfranchisement valuation that leaseholders must follow to calculate the cost of extending their lease or buying their freehold. The Government will abolish marriage value, cap the treatment of ground rents at 0.1% of the freehold value, and prescribe rates for the calculations at market value. The Government will also introduce an online calculator, further simplifying the process for leaseholders and ensuring standardisation and fairness for all those looking to enfranchise. These changes to the enfranchisement valuation process will result in substantial savings for some leaseholders, particularly those with less than 80 years left on their lease. Our reforms to enfranchisement valuation also ensure that sufficient compensation is paid to landlords to reflect their legitimate property interests.

Through our reforms, the length of a statutory lease extension will increase to 990 years, from 90 years (for flats) and 50 years (for houses). Leaseholders will be able to extend their lease with zero ground rent on payment of a premium. Leaseholders will also be able to voluntarily agree to a restriction on future development of their property to avoid paying ‘development value’.

We will translate these measures into law as soon as possible, starting with the Leasehold Reform (Ground Rents) Bill, which was introduced into Parliament on 12 May. This Bill will make homeownership fairer and more transparent for thousands of future leaseholders, by legislating to prevent landlords under new residential long leases from requiring a leaseholder to pay a financial ground rent. This will be the first part of major two-part legislation to implement leasehold and commonhold reforms in this Parliament.

This is a long-term reform programme; it is complex with many interdependencies and will take time to get the detail right. Once it is enacted the effect will be felt for generations and so we are determined this work considers all the implications with care.