England & Wales leasehold reform

evanescent

Hello all, it looks like the government is pressing ahead with the leasehold reform. Amongst other things, abolishing of the marriage value, capping ground rents or reducing to nil, and also the right to extend leases for 990 years. I've just extended the lease on my greater London flat last year. I added 90 to the existing 89 years, so now it's 179 - so basically I will be at disadvantage in the market, as compared to those who will extend to 990 years.

Does anyone know when these measures are likely to be adopted? 

Links here:
https://www.gov.uk/government/news/government-reforms-make-it-easier-and-cheaper-for-leaseholders-to-buy-their-homes 
https://www.lawcom.gov.uk/project/leasehold-enfranchisement/ 

Articles such as this one seem to suggest that these proposed measures have the potential to complicate things even more. 

Extending leases to 990 years
The government has announced that millions of leaseholders will be given a new right to extend their lease by 990 years and reduce their ground rent to zero, in a move it says will make home ownership fairer and more secure.
Bailey added: “Giving leaseholders the opportunity to extend their lease by 990 years is actually a moot point; a leaseholder already has the right to extend their lease by 90 years and reduce their ground rent to a “peppercorn” under existing legislation, and, arguably, there is virtually no difference in the value of a leasehold property with a 990-year lease compared to a 160-year lease.
“In fact, the government’s proposals may do more harm than good, by creating a fourth tier or type of leasehold flat available to potential purchasers in an already confused market.
“There are already those flats with diminishing leases of, say, 75 years, on which mortgage lenders will currently not lend (with or without ‘onerous’ ground rents).
“There are those properties that have extended their leases by adding 90 years and reducing their ground rents to zero under the 1993 Act.
“There are those flats that have already purchased their share of freehold collectively with their neighbours and then extended their leases to 999 years with a reduction in their ground rents to zero.
“There will now be a fourth type, whereby leaseholders will be able to add 990 years to their existing leases, resulting in a lease of over 1,000 years! Surely this will add to the confusion of an already muddled and distorted leasehold property market?”

evanescent

Oh and also, what is the point of a 990 years lease, really? Isn't that akin to full ownership? Why not just abolish the leasehold system like other countries did? 

davidmcn

evanescent said:

Does anyone know when these measures are likely to be adopted? 

If and when the government (and parliament) get round to it.

eddddy

evanescent said:

I've just extended the lease on my greater London flat last year. I added 90 to the existing 89 years, so now it's 179 - so basically I will be at disadvantage in the market, as compared to those who will extend to 990 years.

So I imagine you'll be able to extend your 179 year lease to 990 years.

Presumably your ground rent is zero, and as the article you quote says "there is virtually no difference in the value of a leasehold property with a 990-year lease compared to a 160-year lease" - so your lease should cost virtually nothing to extend to 990 years.

When they say 'abolish marriage value', I suspect they mean 'and replace it with something else'.

Capped (or zero) ground rents will probably apply to new leases, rather than automatically removing ground rent from existing ones. But there's talk of you being able to buy-out your ground rent... or, of course, extend the lease to 990 years with zero ground rent.

evanescent

eddddy said:

evanescent said:

I've just extended the lease on my greater London flat last year. I added 90 to the existing 89 years, so now it's 179 - so basically I will be at disadvantage in the market, as compared to those who will extend to 990 years.

So I imagine you'll be able to extend your 179 year lease to 990 years.

Presumably your ground rent is zero, and as the article you quote says "there is virtually no difference in the value of a leasehold property with a 990-year lease compared to a 160-year lease" - so your lease should cost virtually nothing to extend to 990 years.

Thanks, yes my ground rent is now £0 (it was only £10 before anyway, not increasing). When you say it won't cost anything to extend from 179 to 990... what does that mean? Are you referring to the premium that will be £0? Surely there will be legal costs... and at the moment it's both your own legal costs and the freeholders'. 

bamgbost

Apparently it will come into law by March/April 2022. From what I read in Sunday Times on the weekend.

eddddy

evanescent said:

Thanks, but when you say it won't cost anything to extend from 179 to 990... what does that mean? Are you referring to the premium that will be £0? Surely there will be legal costs... and at the moment it's both your own legal costs and the freeholders'. 

That's a key bit that they're wanting to change - the ridiculous legal and valuation costs.

There's talk of making it an online process instead. I guess the intention is that it would work something like this... you'd key in the details, the system would calculate the premium, send details to the freeholder to ask if they have grounds to object, you'd pay the premium and a fee, and a 'standard worded lease variation' would be generated and sent to LR.

AlexMac

evanescent said:

Oh and also, what is the point of a 990 years lease, really? Isn't that akin to full ownership? Why not just abolish the leasehold system like other countries did? 

No idea as regards the OP's questions about liklihood or when reform will happen, but, having owned 5 or 6 leasehold flats over the years plus a little flat in Italy, I'd say in reply to evanescent, that the UK's leasehold system seems reasonable, as long as you have either a "Shared" freehold (where the leaseholders control the Freehold Company as Directors or Members) or a fair Freeholder who doesn't mis-manage or exploit.   

Otherwise, buildings insurance or things like cyclical or major maintenance (external decoration, roof repair/replacement, balconies, lifts, grounds...) , or even minor stuff like who pays for cleaning or external lighting energy costs would all have to be negotiated on an ad-hoc basis. Whereas the best leases really spell out who does (and pays for)  what, so it's not only the top flats who fret about the leaky roof, or the middle ones who get wet when gutters leak, or the basement who has the cope with rising damp!   Ilike shared freeholds as if there's a retired mug or two (usually moi) willing to keep simple accounts, file the odd staututory return and contact the roof repairs or decorations, you can keep costs really low and stash away a healthy sinking fund

We got rid of the alternative; our little holiday flat in a 300-year-old block of six in a medieval town on Puglia not because I resented having to replace the cimenta (mortar grouting) on the flagged stone roof of our third storey gaff myself, nor limewash the ceiling of the communal stairwell jointly owned by the ancient lady on our floor cos she couldn't, but because the whole town was coming up.  Sooner or later the Town Hall would have been pressing for improvements.  We'd have then got involved in tricky arguments about sharing the cost of renovating the crumbling external stucco- tricky in my halting Italian; even worse in the local dialect!

We no longer own our own leasehold homes, but I'm happy to pay reasonable Service Charges of abouy £800 p.a.to the local authority freeholder of my two little BTLs so I don't have to fret about Insurance, Caretaking, grounds maintenance, balcony repairs, scaffolding for the decs or getting rid of that huge redundant galvanised water tank in the loft!

princeofpounds

Everything edddy said.

There is barely any difference between a 179 year lease and a 990 year lease in value terms. No-one (yet) knows what the proposals are or when they will happen (apart from a statement by the Minister that some limited measures - not most of the stuff in the headlines - may appear in the next parliamentary session). We know the Law Society report that a lot of the reform proposals originate from, but what will actually make it into legislation is totally mysterious as of now.

A lot of the reforms may only apply to new leases.

Marriage value may be abolished as a concept but from comments made by the Minister about compensation to Freeholders it may be substituted by something similar, although overall it sounds like leaseholders should benefit from these reforms.

AdrianC

bamgbost said:

Apparently it will come into law by March/April 2022. From what I read in Sunday Times on the weekend.

That's just speculation.

The draft legislation hasn't been published.
The draft legislation hasn't been voted on, or amended, by either house.
We have no idea if they will actually do it.

All they've done so far is chuck a press-release out that sounds very grand, but means nothing, and announce they might eventually establish a "commonhold commission" that might perhaps make some recommendations that might perhaps feed into that draft legislation.

It's not as if the government have anything else to do at the moment.

evanescent

AdrianC said:

bamgbost said:

Apparently it will come into law by March/April 2022. From what I read in Sunday Times on the weekend.

That's just speculation.

The draft legislation hasn't been published.
The draft legislation hasn't been voted on, or amended, by either house.
We have no idea if they will actually do it.

All they've done so far is chuck a press-release out that sounds very grand, but means nothing, and announce they might eventually establish a "commonhold commission" that might perhaps make some recommendations that might perhaps feed into that draft legislation.

It's not as if the government have anything else to do at the moment.

Thanks, so we still don't know what and when will change... it was the same in 2019 when I asked myself the same question and proceeded to extend the lease anyway. (Back then there was talk of leasehold reform but I don't think there was a govt announcement... so maybe this is a step ahead)