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Today, the UK Government has unveiled a major shake-up of the leasehold housing system In England and Wales - the draft Commonhold and Leasehold Reform Bill.
The Bill will provide significant benefits for existing leaseholders. It will cap ground rents at £250 a year, changing to a peppercorn (effectively zero) after 40 years, “re-writing” existing ground rent clauses in leases. This cap will dramatically reduce the long-term income that landlords expected to receive from existing leases and so lower the values of their reversion.
Millions of leaseholders are going to see their ground rents reduced – this change could mean savings of thousands of pounds over the life of a lease and could make homes easier to sell and remortgage. We have seen a lot of transactions stall or fail over the last few years, because the leases contain “onerous” ground rent provisions.
The move is aimed at helping families with everyday costs, framing the cap as part of tackling the cost-of-living crisis. For landlords, however, this removes a core source of revenue.
The Bill will also abolish the draconian system of forfeiture and replace it with “a fairer, proportionate enforcement regime.” This works for leaseholders as it protects them from losing their homes over minor sums, though landlords contend it unfairly removes a long-standing right used to secure payment and compliance.
The Bill strikes a difficult but deliberate balance: for leaseholders, it addresses unfairness by curbing ground rents, removing the threat of forfeiture and making home ownership more secure. On the other hand, it represents a significant erosion of income, asset value and contractual certainty for landlords. We will be watching the Bill's progress with great interest!
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