A MAJOR rules shake-up rolling out today will see pricey ground rents scrapped for those who buy leasehold homes.
New rules will effectively set ground rents to zero in England and Wales, saving those looking to buy hundreds of pounds.
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A leasehold is where a homeowner buys the right to live in the property for a number of years, but doesn’t actually own the land the property sits on.
Owners of homes that are leasehold pay a ground rent to the landowner, known as the freeholder.
There is no limit on the amount freeholders can charge in ground rent, and costs have doubled over the years.
It means many homeowners have been unable to sell their property because buyers are off-put by the extortionate costs.
They’ve also been trapped paying bills for ever increasing charges that they may end up not being able to afford.
For example, one couple who bought a brand new flat for £117,000 from Taylor Wimpey in 2009 didn’t know they had a doubling ground rent clause.
This saw their ground rent rise for the first time this year from £250 to £500, and it can double again every 10 years until 50 years has passed, by which point the rent will be a whopping £8,000 a year.
But now, those buying a new leasehold property will now never have to pay ground rent charges.
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It could also benefit those looking to informally extend their lease, MoneySavingExpert reports.
That’s because the freeholder will not be able to increase your ground rent for the remaining period of your existing lease term.
Once your new term starts, you won’t pay any ground rent at all.
However, be aware of taking on a leasehold home which has a lease of 70 years.
That’s because a short lease will be a lot more expensive to extend –
The government estimates that there are just over 4million flats and new-build homes in England which are leasehold.
It comes as thousands of leaseholders were told they would be refunded for unfair ground rents last year.
The Competitions and Markets Authority launched an investigation into whether leasehold homes were being mis-sold and high ground rents.
Following this, Aviva said it would repay households extra money they spent on spiralling charges.
Developer Persimmon Homes also agreed to allow leaseholders to buy the freehold of their property at a discount.
