Leasehold doesn’t need to be a dirty word any longer
New rules on leaseholds and ground rents have come into force, addressing an issue which has blighted the lives of millions of home owners.
Ground rents can only be charged at a maximum ‘one peppercorn’ on new build leasehold homes or new leases, after the changes came into force on June 30th 2022.
The move is designed to prevent the situation many homeowners have found themselves in, of living in a property they cannot sell due to the contractual obligation of increasing ground rent.
While the law is not retrospective, and there are no provisions made for the owners of existing leasehold properties, there are myriad ways to combat the problem which buyers and sellers may not be aware of says June Caunce, head of conveyancing at Vincents Solicitors.
She said: “Leasehold has been a dirty word for so long now that it will take time for people to understand it no longer has to be an issue.
“People have had transactions fall through when searches have revealed the buyers’ future ground rent costs, or when the mortgage company has refused to lend on the property, yet the homeowners are desperate to sell as they become subject to extortionate ground rent increases.
“Following the rule change, new leasehold agreements will be set at a nominal annual charge, preventing rates from doubling every 10 years, costs skyrocketing, and homes becoming unsellable. We welcome the new legislation and hope it will provide reassurance for buyers of new build homes in the future.
“We’re also working hard to help those already trapped by the leasehold problem. Although the new rules are not retrospective, the government clearly intends to see the issue addressed. There are further steps they can take, and it is hoped legislation will progress giving existing leaseholders the right to extend their lease for 990 years without charge, for example, but that has yet to be formalised.
“In the meantime, we are helping clients who want to sell a leasehold property to mitigate the problem via a number of different measures. This could be to negotiate to purchase the lease, secure a deed of variation or indemnify the lease. Which option is selected will be down to each person’s circumstances, but we can advise on which could be right for you.”
Owners of an existing leasehold property can consider the following:
1) Purchase the lease
2) Secure a Deed of Variation to fix the ground rent at a reasonable sum without increase
3) Purchase an indemnity policy acceptable to the mortgage company
For help with selling an old leasehold property contact Vincents Solicitors residential property department 01772 555 176.