Potential changes to the leasehold system look likely to affect up to 182,000 homeowners across Merseyside. What exactly is the leasehold system, and how are the proposed changes likely to affect homeowners?
What is the Leasehold System?
Establishing whether a property is leasehold is a vital part of the conveyancing process. Sites such as https://www.gov.uk/leasehold-property can help you to understand the differences between leasehold and freehold.
If you buy a property with a leasehold agreement, this means that you only own your property for a specified amount of time. If you own a leasehold property, you will have a lease agreement with the landlord (freeholder) specifying how long your lease will last.
Leasehold is different from the other commonly found form of agreement in the UK, freehold, under which a property owner owns the property outright with no designated time limits. In the case of freehold agreements, the owner is also the freeholder.
If your property is a leasehold property, ownership of the property returns to the freeholder at the agreed end of the lease. In contrast, if you own a freehold property, you own the property and the land it stands on outright.
What Difficulties can a Leasehold Property Cause?
Leasehold is notorious for causing problems for homeowners, so it’s important to check the lease status as part of the conveyancing process. A lease that’s valid for less than another 80 years has been seen to significantly diminish a property’s value. A conveyancer will be able to check the legal agreements surrounding your property.
What is the Proposed Leasehold Reform?
Proposals to reform the processes and laws surrounding leasehold have been proposed. They are due to be brought before Parliament some time in 2021. If passed, these changes could see leaseholders saving up to £9,000. This bill proposes allowing leaseholders the opportunity to extend their leases to a standard of 990 years. This is a much greater amount than the current standard. A standard lease today is usually set at around 125 years, though leases can theoretically last for up to 999 years. Sites such as https://www.gov.uk/government/news/government-reforms-make-it-easier-and-cheaper-for-leaseholders-to-buy-their-homes offer further information.
What About Blocks of Flats?
For blocks of flats, the government wants to introduce a new system known as ‘commonhold’. This has already been applied to some newly constructed blocks of flats. A commonhold system sees owners holding the freehold to their own individual flat, while the building as a whole is jointly held under a commonhold agreement. This means that owners wouldn’t have to pay ground rents, but they do have to jointly agree how to undertake building management. This could be a tricky process in larger blocks of flats.
Why is this Important for Merseyside?
Merseyside residents will be particularly interested in seeing whether the proposed reforms pass as the region has one of the highest numbers of homeowners having leasehold rather than freehold properties. The North West of England has the highest number of leasehold properties outside of London.