In a move aimed at “restoring true home ownership,” the UK government is set to unveil plans to phase out the leasehold system for all new houses in England and Wales. This initiative is expected to be introduced through a new Leasehold Bill, to be presented in the upcoming King’s Speech, according to an article published in The Times over the weekend.
The Leasehold Bill, which will be spearheaded by the Department of Levelling Up, Housing and Communities, headed by Michael Gove, seeks to put an end to the controversial practice of selling new-build houses as leasehold properties. In the past, some developers have adopted this approach, subjecting homeowners to potentially burdensome ground rents.
As part of the proposed legislation, all new houses will be required to be sold as freehold properties, while new flats may still be offered as leasehold. This significant change aims to ensure that future homeowners have true ownership of their properties without being bound by leasehold agreements.
The Times reports that Michael Gove’s department also intends to cap ground rents on existing leasehold properties at a “peppercorn” rate, a symbolic and nominal fee. Additionally, the standard lease extension period will see a substantial increase, moving from 90 years to an extended term of 990 years. This change is set to provide more security and flexibility for leaseholders.
In another development, the government is planning to eliminate the requirement for residents to have lived in a property for two years before they can negotiate a lease extension. This alteration is expected to streamline and simplify the extension process for leaseholders.
These recent proposals echo sentiments expressed earlier in the year when Michael Gove criticized the “outdated and feudal” leasehold system. However, those earlier suggestions did not make it into the Levelling Up Bill, which recently became law.
The Department of Levelling Up, Housing and Communities (DLUHC) has estimated that there are more than 4.5 million leasehold homes in England, with approximately 30 percent being modern houses. The proportion of new-build houses sold as leasehold saw a notable increase, rising from seven percent in 1995 to a peak of 15 percent in 2016 before a decline in recent years.
Housing Minister Rachel Maclean confirmed the news via Twitter, stating, “Plans to phase out leasehold and restore true home ownership confirmed today as part of the King’s Speech. We will restore true home ownership to millions of people and end the reign of rip-off freeholders and incompetent profiteering management companies.”
The government’s proactive steps to transform the leasehold system and enhance the rights of homeowners are expected to have a significant impact on the property market in England and Wales, promoting a sense of true ownership and security among future homeowners.