The government has announced the end of toxic leases – much to the delight of the suffering homeowners.
Housing Secretary Robert Jenrick said the new laws are being introduced to banish "the scandalous pitfalls of leasing" and "put fairness back at the heart of the housing system".
The changes were widely welcomed as good news for tenants who have long faced problems such as doubling the base rent and extortionate costs of extending their leases.
New Legislation: The government has announced the end of toxic rental houses
WHAT IS A LEASINGHOME?
A rental property has a number of key differences from a condominium.
When buying a rental property, you need to know about things like basic rents and lease renewals.
Here we explain some of the terms you need to know:
Unlike an owner, as a tenant you do not own the land on which the property was built. A lessee essentially rents the property for a number of years, often between 90 and 120 years, but it can be as long as 999 years.
2. Basic rents
Basic rent is the rent that the owner of a building pays under a lease to the owner of the land on which it was built. The amount paid depends on the rental conditions.
3. Lease Extensions
A lease extension refers to a legal agreement that extends the term of an existing lease.
4. Purchase of property
When you buy a condominium, it means you fully own it, including the land on which it was built. You are responsible for the upkeep of your property and property, so you need to budget for these costs.
If you are a tenant, you should consider buying your property. This has advantages and disadvantages as it may give you more control, but it also requires more effort. You can find more information about purchasing your property here.
The changes introduced by the government allow homeowners to extend their leases for up to 990 years with a base rent of zero.
Miles Robinson of mortgage broker Trussle said, & # 39; We appreciate the news that homeowners will be granted additional rights that allow them to extend leases for up to 990 years with a base rent of zero.
"It's a major change that will eliminate unnecessary fees and make owning and selling a home easier and more equitable for millions of people."
Katie Kendrick of the National Leasehold Campaign said, “For far too long the tenants have been told that it is their own fault to sign these toxic agreements, but this announcement proves the flawedness of this system and marks the beginning of the end for the lease .
"We are delighted that the government has made a commitment to implement these reforms in this Parliament, and we urge them to strongly oppose the sector's fierce lobbying and delaying tactics that are determined to keep the lease sauce train going . "
In recent years, the pitfalls of leases have resulted in many of those who own this type of property being unable to sell their homes.
This is because the soaring costs associated with them made lenders increasingly nervous when it came to lending to rental homes and also deterred buyers.
We take a look at the government announcement and what it could ultimately mean for tenants.
Why did the government decide to take action?
The government said reform of the lease system was needed to "end some of the worst homeowner practices".
It is claimed that the changes are part of the largest reforms of English property law in 40 years and will result in a whole new system.
The following is a Law Commission report from last year claiming the "medieval" lease system was not working. Years of campaigning for change followed, particularly after the scandal of new buildings being sold as lease rather than property.
When the government announced the changes, it said: "Under the law in force, many people face high basic rents which, when combined with a mortgage, can make them feel like they are paying rent on a property they own."
The changes aim to reduce this financial burden for many tenants.
How high will the basic rents be under the new law?
The government says that any tenant who renews their lease "no longer pays the basic rent" to an owner.
Base rents can be hundreds, if not thousands, of pounds a year now and can rise sharply over time depending on the clause in the rental agreement.
The government has announced that it will lower the basic rents to zero, as this will allow those who want to own a home "without burdensome bureaucracy and additional unnecessary and unfair costs".
How much could this save the tenants?
The changes could save tenants thousands to tens of thousands of pounds, the government said.
Exactly how much has yet to be announced, but the housing minister has said he wants to reduce the cost of the lease.
Mr. Jenrick said, "We want to strengthen the security of home ownership by forever changing the way we own homes and ending some of the worst practices homeowners face."
Do the changes mean a longer lease extension?
According to the applicable rules, tenants of houses can only extend their rental contract once for 50 years with a basic rent.
At the same time, tenants of apartments can renew as often as they want for 90 years for a basic rent of zero Pfefferkorn.
The changes mean that tenants can extend their lease to a new standard of 990 years with a base rent of zero.
What does it cost to renew the lease or buy the property?
Many tenants try to extend their lease or buy the property.
This can be for a variety of reasons, not the least of which is to gain more control over the management of the property or to make it more attractive to potential buyers (since lenders do not issue loans for shorter leases).
The extension of the lease is also a requirement for the basic pension to be reduced to zero as part of government reforms.
However, extending the lease is something the tenants have to pay for.
You can choose to buy the land first before renewing the lease to take the shareholder out of the equation entirely in the future. You don't have to buy the property to renew your lease.
The government has announced that renewing the lease or buying the property will cost less than before – and the cost will be calculated using a new online calculator.
Where can I find the online calculator to calculate these costs?
The online calculator helps tenants find out how much it costs to buy their property or to renew their lease.
However, it will not be introduced until the changes are required by law. So the tenants have to wait until then to find out the cost.
The current calculation includes elements such as “marriage value”, which increases the cost.
The matrimonial value is the increase in value of the property after signing the lease extension, which reflects the additional market value of the longer lease.
This element is being phased out because the government has labeled it an "unaffordable cost" and wants to ensure that the calculation is "fairer, cheaper and more transparent".
Is Commonhold still an option?
The housing minister wants to increase the number of Commonhold agreements, a little-known form of ownership that allows residents of blocks of flats to maintain them themselves or to hire a maintenance company to do so.
This would mean residents could fire them if the company didn't do the job properly.
The government is establishing a Commonhold Council to encourage homeowners and the market to adopt Commonhold.
When will the new law be introduced?
The tenants welcomed the news and demanded that the legislative changes be implemented immediately.
Tenant Jim Iillingworth said, “I welcome the announcement. With Covid and Brexit, the government has proven that it can pass laws in hours and days. Why should lease reforms take longer? & # 39;
In reality, the schedule will likely be months and possibly well into next year.
Properties, Mr Hayward, stated: “Laws are put in place when the parliamentary schedule allows. But they will want to do this soon before the next general election, to appeal to the electorate. & # 39;
BW Residential's tenant expert Bernie Wales said: “The changes are good news for tenants. The tenants have waited a long time for them, hoping the government will put them into effect sooner rather than later. & # 39;
The government has confirmed that legislation will be presented at the upcoming session of parliament to set future basic rents to zero. This is the first part of the landmark two-part reform legislation in this Parliament.
How many people will be affected by the new law?
Nearly 4.5 million tenants could be "tens of thousands" better off, according to the government.
Will the basic rents also be reduced for retirement homes?
The changes include measures to protect people living in senior rental properties that are built specifically for the elderly.
The government says buyers of these homes will now have the same rights as other homeowners.
However, Mr Hayward added, "While we welcome the government's initiative to bring the base rents to zero on all new retirement homes, we would argue that this needs to be expanded to include all retirement properties in order to level the playing field."
(tagsToTranslate) dailymail (t) home (t) property (t) Alok Sharma