New leasehold flats will be banned by the next election in a move ministers say will bring an end to the centuries-old “feudal” property system.
The government has set out its next steps to scrap leasehold as a form of homeownership in England and Wales, which was promised in Labour’s manifesto.
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Under the system, which dates back to the Middle Ages, freeholder landlords own a building’s lease and tenants who purchase homes buy the right to live there for a given number of years.
Ministers want to move to an arrangement called commonhold, which is more in line with the rest of the world and means people will own a share of the building, giving them greater control over how they are run.
As Sky News has previously reported, existing leaseholders have described feeling like “cash cows” as they have no say over costs of repairs and maintenance to their blocks.
Many leaseholders also have to pay ground rent – essentially a fee for the right to occupy property on land that is not theirs – with clauses in their contract that allow the landlord to raise it without providing any service in return.
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Leaseholders plead for tougher legislation
A white paper launched on Monday has set out how commonhold will be “reinvigorated” through a new legal framework and the sale of leasehold flats banned.
It means people who buy flats 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, the government said.
The paper will form the basis of the draft Leasehold and Commonhold Reform Bill, which will be published in the second half of this year, setting out how the new system will work.
Katie Kendrick, co-founder of the National Leasehold Campaign (NLC), told Sky News today’s announcement was a “welcome step in the right direction” after years of broken promises on leasehold reform.
She urged ministers not to “leave existing leaseholders behind” and crack on with implementing reforms in the Tories’ Leasehold and Freehold Reform Act (LFRA).
The bill just about made wash-up when Rishi Sunak called the July election, after being watered down by then housing secretary Michael Gove.
However, the majority of the provisions are not in place as Labour said the legislation was “half-baked” so there would be delays in implementing some of its measures.
This includes the abolishment of ‘marriage value’, an additional premium that has to be paid to the landlord to extend a lease when it drops below 80 years.
For people like Melissa Harker, who was quoted £15,000, the unaffordable demand leaves them stuck in a property they can’t sell, as shorter leases are much harder to get mortgages on.
‘Still stuck’
“I don’t have it but I don’t see what I am paying for except a piece of paper”, she told Sky News.
“Because my lease is so low I can’t sell, I can’t remortgage, I am in negative equity.
“I am pleased new flats won’t be leasehold for people moving forward but there’s so many people stuck with this nightmare.”
There are around five million leasehold properties in England and Wales, the majority of which are flats.
The government has previously said it will consult on valuation rates used in lease extension calculations in the summer of 2025.
It has also said it is “determined” to make conversion to commonhold easier for existing leaseholders – but there are a number of areas they still need to resolve to create an effective conversion process.
This includes how to tackle leaseholders who don’t want to or can’t afford to convert.
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Housing Minister Matthew Pennycook said: “This government promised not only to provide immediate relief to leaseholders suffering now but to do what is necessary to bring the feudal leasehold system to an end – and that is precisely what we are doing.
“By taking decisive steps to reinvigorate commonhold and make it the default tenure, we will ensure that it is homeowners, not third-party landlords, who will own the buildings they live in and have a greater say in how their home is managed and the bills they pay.”
