Ground rents will be capped at £250 a year for leaseholders in England and Wales in a major win for homeowners.
New leasehold flats will be banned, and existing leaseholders will get the right to switch to commonhold in a bid to give people greater control over their properties.
Prime Minister Sir Keir Starmer said: ‘I’ve spoken to so many people who say this will make a difference to them worth hundreds of pounds.
‘That’s really important because the cost of living is the single most important thing across the country.’
The reforms will be published in the draft Leasehold and Commonhold Reform Bill, which will be introduced today – here’s all you need to know.
Under the proposals, England and Wales would gradually move to a ‘commonhold’ properties instead, which are used more widely around the world.
The new system would see homeowners in new build developments own the land that their property is built on, as well as the property itself.
Under the current system, third-party landlords can own a building’s lease and therefore make decisions on behalf of homeowners.
With these new rules, homeowners will have a stake in the ownership of their buildings from day one, not have to pay ground rent, and will gain control over how their buildings are run.
But landlords have argued the move will result in ‘greater financial and legal responsibilities’ for residents, and leasehold is the ‘
If you buy somewhere as a leaseholder, in addition to paying any utility bills and your mortgage, you often will have to pay a ground rent fee and a service charge on top to the person who owns the land, who is known as the ‘freeholder’, for a certain period of time, which is often more than 100 years.
The ground rent can be as low as a ‘peppercorn’, i.e. a very small amount, or can be hundreds of pounds per year and covers the rental cost for the land on which it is built.
The service charge, meanwhile, covers expenses such as building insurance, maintenance and repair costsas well as cleaning fees. These can run up to thousands of pounds per month or year, depending on how expensive your property is and whether or not it has extra features, such as a private gym.
Don’t miss our Property news! Add us as a Preferred Source
At Metro Property, we want to make sure you never miss our articles when searching for stories. We’re always here to bring you the latest news and advice on buying, renting and home renovations, with a vibrant community of highly engaged readers.
Click here and tick Metro.co.uk to ensure you see stories from us first in Google Search.
Leases for new build flats currently start from 999 years, and once the period expires, the ownership reverts back to the freeholder.
People who are buying flats, however, are encouraged to make sure the flats have a minimum lease of at least 100 years or more, as once the lease falls to 80 years or below, they will have to pay for the cost of extending the lease to be extended.
The Residential Freehold Association, the trade body representing professional freeholders, said the ground rent cap was ‘wholly unjustified’.
A spokesperson for the RFA said: ‘The inclusion of a ground rent cap in the draft Leasehold and Commonhold Reform Bill represents a wholly unjustified interference with existing property rights, which if enacted, would seriously damage investor confidence in the UK housing market and send a dangerous and unprecedented signal to the wider institutional investment sector.
‘Property rights and contract law are fundamental drivers of domestic and global investor confidence in the UK. Instead of focusing on those reforms which address the issues that leaseholders care most about, the Government’s draft Bill will tear up long-established contracts and property rights, which are pillars of the UK’s investment reputation.’
‘This is, despite the previous government’s own impact assessment showing compensation could exceed £27 billion. The resulting forced exit of professional freeholders from the sector will hinder building safety projects and disrupt the day-to-day lives of residents.’
Get in touch with our news team by emailing us at webnews@metro.co.uk.
For more stories like this, check our news page.