Plans for radical overhaul of UK home leaseholds unveiled

Exorbitant ground rent charges could be cut dramatically for British homeowners under new proposals from the Law Commission as part of the government's reform of the system.

One proposal is a “simple formula for calculating the premium, which is not based on the market value of the interest being acquired by the tenant”, the commission said, adding that this could be 10 times the ground rent.

“Introducing a simple formula would remove professional valuation costs and uncertainty about how a premium will be calculated,” it said.

The government has estimated that there are more than 4m leasehold properties across England alone including 1.4m houses, with some claims that the figures are “significantly underestimated”, the commission said,

“Enfranchisement offers a route out of leasehold but the law is failing homeowners: it’s complex and expensive, and leads to unnecessary conflict, costs and delay. We’ve heard of untold stress caused to homeowners who have had to put their lives on hold because of issues with their leases.”

“Clearly, that’s not right, and our solutions for leasehold houses will provide a better deal for leaseholders and make sure that the law works in the best interests of house owners.”

Housebuilder Taylor Wimpey last year had to set aside £130m to cover claims from customers over leasehold policies.

The company defended the practice as “entirely legal” but did acknowledge that it had caused “understandable concern”.

Taylor Wimpey initiated a review after it was revealed that property freeholds were sold on to third parties who would only sell to the owners for a large premium. This left customers with unsaleable homes as lenders would not approve mortgages on properties where the ground rents would double every 10 years.

“We acknowledge that the introduction of these doubling clauses was not consistent with our high standards of customer service and we are sorry for the unintended financial consequence and concern that they are causing,” the company said.

The Guardian reported examples where homeowners were told they could buy the freehold from the developer within two years only to discover that it had been sold on without their knowledge.

The government has also announced a ban on selling new homes on a leasehold basis and said ground rents may be set to zero.

It cited recent cases which included a homeowner being charged £1,500 by the company to make a small alteration to their home; a family house now unsaleable because the ground rent is expected to hit £10,000 a year by 2060 and a homeowner who was told buying the lease would cost £2,000 but the bill came to £40,000.