LEASEHOLD REFORM - IS LEASEHOLD ABOUT TO BE ABOLISHED?

Is Leasehold Going To Be Scrapped?

Buying a leasehold property in Hackney means that you’ll need to consider the issue of ground rent – an amount paid to the property’s freeholder each year for the land your property is sitting on.

Most leases permit the ground rent to increase periodically, and a lot of new-build companies were, until recently, selling homes that have an escalating ground rent clause written into the lease that permits doubling of the payment regularly.

Therefore, some leaseholders need to pay an unreasonably large amount in ground rent, which is something prospective buyers must consider when choosing the right home to buy.

The Other Problems With Leasehold

High ground rent is just one issue associated with buying a leasehold property. There are a few other problems that owners face too. Firstly, they are required to pay service charges for maintaining their building, and again, that can be unreasonably high.

Many freeholders are also now only offering short leases of 125 years, and extending that lease or buying out the freeholder can be time-consuming and very expensive. When all these issues are considered, it isn’t surprising that many homebuyers in Hackney are deterred from investing in a leasehold home.

Is Change On The Horizon?

Both industry organisations and the government have recently recognised that these issues exist and are starting to take steps to rectify the situation.

In June 2022, the Leasehold Reform Act was brought into law, abolishing ground rent on every new lease in Wales and England, together with all informal lease extensions. As of April 2023, retirement properties cannot charge owners ground rent under the terms of the new legislation too.

Newly-built developments and all renewed leases must now be for 990 years, resolving the problems associated with selling properties with a short remaining lease period.

Leasehold Buildings And Cladding

In 2017, over 70 people were killed in the terrible fire at the Grenfell Tower due to the dangerous cladding on the building, combined with other failings in fire safety measures. That has led to several changes to the fire safety regulations for apartment blocks.

The Building Safety Act passed in April 2022 aimed to improve building safety, while offering financial protection for all qualifying leaseholder owner flats in blocks over five storeys or 11 metres in height.

The building owner cannot now charge owners for remedial works or removing dangerous cladding (as long as the owner has less than three residential properties in the UK). Further protections have been introduced from costs associated with some other building fire safety measures like waking watches.

Abolition Of The Leasehold System

However, the leasehold system hasn’t yet been entirely abolished, even though the Housing Secretary implied that a reform bill would be included in autumn’s Parliament session. Whether or not this will happen remains to be seen, however, it seems that positive change is certainly within reach.

If you’re considering buying a leasehold property in Hackney, don’t hesitate to get in touch with Amar Mustafa - The REAL Estate Agent on 020 3150 5007. I can give you the advice you need to make a well-informed decision.