The government has stepped back from a pledge to abolish leaseholds and replace them with a new system of commonhold property ownership. Despite previous criticisms of England’s “feudal” property system the Department for Levelling Up, Housing and Communities has put any major reforms on hold, citing concerns over the legal complexities involved. Ownership of a lease permits only the legal right to use a property, with no say over the land on which it built. In the past this has led to excessive ground rent charges imposed by freeholders, as well as high service charges to cover communal areas shared by the property.
Almost five million households, equating to 20% of homes in England, would be affected by any improvements to the leasehold system and in an attempt to deflect some of the anger over the policy u-turn the government has instead announced changes to ground rent charges. Housing Secretary Michael Gove is to reveal plans to cap the amount that freeholders can charge current leaseholders in ground rent at around 0.1% of the property’s value. At present large numbers of leasehold flat owners may be required to pay ground rent of up to £700 per year. New rules on service charges will be introduced, as well as a ban on including commission to buildings insurance costs.
The government has already banned charging ground rent on new leasehold property, and the plan to cap the level of ground rent on existing property aims to lessen the effect of the charge on current leaseholders. Future government proposals also include making it easier and cheaper for leaseholders to extend the term of their lease or to buy the freehold, with the aim of giving home owners more control over their property.
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