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Leasehold property | HK News

Government proposes to remove leaseholds from new build homes

| Published on July 5, 2019

The government has recently revealed its latest proposals to ensure that all new-build homes are to be sold on a freehold basis only and that the ground rents on new flats will be slashed to zero in an attempt to reform the leasehold property sector. However, these proposals target two different issues facing prospective buyers in today’s property market.

The first of these proposals seeks to target the problems that some buyers of leasehold properties may face relating to additional fees and permissions that a landlord may demand. These approvals can range from Landlord Consent for the erection of an extension to the property, to Landlord Notices of Assignment when the property is subsequently sold again. These are classic examples of when a landlord is in a strong position to charge sometimes significant fees with leasehold properties. The government’s proposals to prevent new-build leasehold homes aims to challenge these fees and therefore protect first-time buyers from developers who may seek to abuse the system and charge large fees, which do not apply to the usual freehold houses.

However, slashing ground rents to zero is targeting a completely different issue in the leasehold sector. Even with a ground rent of zero, the potential fees charged by landlords could still apply. Instead this proposal takes aim at the instances where the lease provides for the ground rent to increase over the term. Although it is common for the ground rent at the start of the lease to be notional; often as low as £10 per annum, there have been instances where the ground rents have spiraled dramatically. As such, first-time buyers could be left facing hefty ground rents several years after the start of the lease or facing large fees charged by the landlord for a Deed of Variation to solve this issue. Slashing the ground rents to zero would stop this and allow leasehold flat owners to enjoy their properties much in the same way as any freeholder.

The government’s proposals are a welcome recognition of some of the issues that could face first-time buyers in the leasehold sector, but it remains to be seen how these changes are going to be implemented. Leasehold residential property is already a complicated area of law and can be confusing for many homeowners.

If you are looking to purchase your first freehold or leasehold property Humphries Kirk can help and explain these issues to allow you to take your first steps on the property ladder with peace of mind. Click here for more advice and guidance regarding buying and selling property, whether a first-time buyer or moving up the ladder.

Humphries Kirk has offices in Bournemouth, Parkstone, Poole, Swanage, Wareham, Dorchester and Crewkerne, a consulting room in London and an international network of lawyers. Visit www.hklaw.eu for more information.

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