Help is now at hand for leaseholders as the Competition and Markets Authority had ruled that doubling the ground rent every 10 to 15 years is unfair. Not only would there be an increased cost with no extra benefit, but it also makes it more challenging to sell the property.
When it comes to freeholders and leaseholders, there are major differences. A freeholder is someone that owns the property outright, whereas a leaseholder owns a lease for the property. This lease gives them the right to use the property for a period of time through an agreement with a company or individual who owns the freehold.
Although buying a flat on a leasehold basis is very common, selling properties this way has snowballed in the past few years. Builders and developers have realised that they could charge an annual ground rent with the potential of doubling the ground rent every 10 to 15 years, in addition to achieving the sale price of the property.
Developers may also sell their freehold properties to external investors who may increase ground rents. You can buy the freehold from the developer once the sales have gone through on a leasehold basis, but the developer will be able to ask for any price they wish.
The government had announced significant property law changes, which are arguably some of the biggest changes we’ve seen in 40 years. These changes mean that homeowners who have been caught in this trap will now be able to gain greater control over their properties and worry less about ground rents which may have been costing them significant amounts.
One of the new legislation will enable leaseholders to extend their property leases to 999 years with no ground rent. In addition, under these plans, the cost of extending a property lease will also come down, which has been known to cost tens of thousands of pounds. The great benefit of this new change is that leaseholders of flats or houses will be able to extend their property leases to 999 years with zero ground rent.
However, it’s still important to be aware and understand your rights and obligations as a property freeholder or leaseholder, even when the new changes have passed. Make sure that your conveyancer or solicitor provides full explanations and walk you through the terms and conditions.
About Stuart Mosley
Stuart Mosley (CeFA, CeMap, CLTM) founded SJ Financial Solutions in June 2005 having spent 12 years with big corporates such as Halifax and Santander. He felt the personal touch and straight speaking was missing from financial and mortgage advice services and set up SJ Financial Solutions to change this.
If you would like to book an appointment then please get in touch and we can arrange a suitable time to discuss further. We can arrange appointments at a place and time suitable to you, we can discuss your options over the phone or if you prefer email, then this is fine with us.