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08th January 2021

Government plans to simplify lease extension

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As part of the proposed reforms to home ownership, the Government has announced yesterday proposals to allow leaseholders of both flats and houses to extend their leases by a maximum term of 990 years at zero rent as well as restricting ground rents to zero in future leases.

At present, flat owners can extend their lease by an extra 90 years at a peppercorn or nil rent, but, as part of the price, must pay marriage value if the term of their current lease is less than 80 years.  This can add significantly to the price payable. People who have a leasehold interest in a house can extend their lease by 50 years (or acquire the freehold), but at a modern ground rent once the original term has expired. This means it has generally been preferable to buy the freehold, although that is not practicable for everyone.

In both cases, there is potential for significant argument as to how the price payable on lease extension or acquiring the freehold should be calculated, which can be both time consuming and costly.

The Government proposals will include setting calculation rates to simplify the process and introduce an on-line calculator to make it simpler for leaseholders to find out what they would have to pay. Any potential for development can also impact on the price; the Government proposals include the potential for voluntary agreements to restrict future development to avoid having to pay development value.

To see the full proposals and reaction to those, please click on the following link:

For more information please contact Kate Church by clicking here