The laws governing leaseholds is under review, following a proposal to ban the sale of leasehold houses, this consultation is due to be closed on the 19th of September. It looks unlikely that leaseholds will be banned entirely, but more stringent regulations will likely be enforced. The government are looking to tackle “unfair and unreasonable” leasehold terms identified in the consultation.
Leaseholds are commonly used to set up estate management charges and tend to be simpler and administratively cheaper than the alternative. It gives new buyers predictability in costs for future maintenance. These charges are governed by the service charge regime in the 1985 Landlord and Tenants Act; this protects against excessive charges while allowing for enforcement of unpaid charges. There are developments which require such charges, such as, garden villages, retirement schemes and developments on land with specific restrictions. In these cases the homeowner needs a mechanism for contributing to shared services.
It is expected that the Government will prescribe a calculation which will be used to calculating the relevant premium in future. This should also be applied to keep ground rents at commercially sensible levels and prevent excessive rent reviews. It has also been suggested that builders should be required to offer buyers the option to purchase freehold or leasehold and provide buyers with information outlining the variation between the two.