The government wants a wider adoption of commonhold

The government wants a wider adoption of commonhold

Land reform continues with essential changes in the legal landscape. In the upcoming Parliament session, the new piece of legislation is going to nullify future ground rents. The Law Commission of England and Wales recommended this change last summer.

As a result, many millions of leaseholders will receive the right to extend their lease by a maximum term of 990 years at nil ground rent.

Under current rules, leaseholders of houses can extend their lease only once for 50 years with ground rent. The situation is not fair to leaseholders of flats who can extend as often as they wish at a nil “peppercorn” ground rent for 90 years. 

The coming changes will mean that any leaseholder who chooses to extend their lease on their home will no longer pay any ground rent to the freeholder. These changes could save them tens of thousands of pounds for many leaseholders.

For leaseholders to find out how much it will cost them to buy their freehold or extend their lease, the government will provide an online calculator. There will be a limit on a ground rent payable when a leaseholder chooses to either extend their lease or become the freeholder. 

Leaseholders will also voluntarily agree to a restriction on the future development of their property to avoid paying “development value”.

The government is establishing a particular body – Commonhold Council. The new body is a partnership of leasehold groups, industry and government. That will prepare the market for the wider adoption of commonhold.

What is commonhold

Currently, no more than 50 properties in England use commonhold as property tenure, most of them are blocks of flats. It is a new type of tenure. It was only introduced in the last decade or so, it mostly applies to flats or apartment blocks.

With leasehold flats, a lease may run for anything from 50 to 999 years, but the property ownership will always revert to the freeholder when the lease runs out. In effect, the flat owner is the freeholder of their own property while having a collective interest in the property’s shared parts with the other residents.

ORACLE CAPITAL GROUP is an investment and real estate development consultancy. Our experience includes successfully completed projects in commercial property, leisure, hospitality, retail and student accommodation.

Most Recent News

How to hold your property in a buy-to-let company?

How to hold your property in a buy-to-let company?

How did the UK housing market perform at the end of 2020?

How did the UK housing market perform at the end of 2020?