After months of speculation the Government has finally announced plans for an overhaul of the leasehold system with the publication of their draft Leasehold and Commonhold Reform Bill. The document contains a number of headline announcements including capping ground rents at £250 a year, the abolition on the sale of new leasehold apartments and of forfeiture whereby leaseholders can lose their home and any equity if they default on a debt as low as £350.
The government says thats in its proposals, ground rents will ultimately be reduced to a peppercorn, in theory zero, after 40 years. The abolition of the sale of new leasehold apartments will usher in the introduction of commonhold. It is hoped that this will result in those living in a building with the new commonhold model will have a say in the annual budget and how the building is run, and new protections when things go wrong. Many commentators highlight the challenges that current leaseholders suffer with due to high service charges.
The bill will now begin to make its way through parliament initially with MPs on the Housing Committee with the government saying the cap could come into force in late 2028.
Whilst the proposals may not come into force until 2028/2029, and may well be challenged, it is a major step forward for the tens of thousands of leaseholders who have been grappling with soaring, often doubling, ground rents often bieng unable to sell their apartments. In Liverpool City Centre we have seen thousands of such instances where owner occupiers and landlords, already dealing with the huge issues of the Building Safety Act, have been restricted to selling to cash buyers only as UK based lenders have refused to lend on those apartments with high ground rents (often over £250pa) or with unfair rent reviews.
