Historically, Scotland had its own form of property tenure known as ‘feuhold.’ Still, the abolition of this feudalism-dominated Scot law ended feuhold by introducing the ‘Outright or Absolute Ownership’ tenure – an equivalent of England’s ‘Freehold’ tenure.
Although some isolated areas in Scotland still have leasehold properties, it is much more common in England. In fact, the Long Leases Act of 2012 (Scot) automatically converted long leases over 175 years to outright ownership.
Recently, England proposed a major property law reform in over 40 years involving lease extensions and zero ground rent.
This article addresses these changes in property law across Scotland and England while identifying overlapping factors that have shaped these changes and what they mean for leaseholders.
What Is Freehold Property
Most housing in Scotland is Freehold, i.e. when you buy a property, it’s yours, but it’s still crucial that you know the differences between different types of property ownership. Freehold ownership means you own the property outright without time-bound leases or having to pay any ground rent.
When purchasing a freehold property, the buyer will become the ‘forever’ owner of the structure and the land it’s built on. You will continue to hold the freehold title unless you sell the property to someone else.
What Is Leasehold Property
Although it’s rare to find leasehold properties in Scotland, they’re quite common across England. Having a leasehold ownership means you have exclusive rights to the property but only for an agreed period, which can vary between short leases (a few weeks) to long leases (up to 999 years).
In England, new measures that benefit leaseholders when converting to homeownership include a cap on ground rent when they choose lease extensions or become a freeholders. On the other hand, Scotland’s Long Lease Act 2012 automatically converts ultra-long leases (175 years or more and an annual rent of £100 or less) into outright ownership.
Issues Surrounding Leasehold Property In The UK
- Over the past few decades, investors and developers have officially increased ground rents with a new clause in leasehold contracts.
- Ground rent was set at £200-£400, doubling every ten years, creating an absurd increase of homebuyers stuck in contracts with spiralling ground rents.
- Homes with this ground rent clause need help finding lenders that will grant mortgages against their homes.
- A smart real estate agent will discourage potential buyers from purchasing leasehold properties, so these homeowners end up selling their properties for discounted rates, which is a considerable loss.
Legislative Intervention To Combat These Issues
Unlike Scotland, England and Wales were the only remaining jurisdictions in the world to retain leasehold property laws. However, the UK government recently proposed radical changes to leasehold property laws involving banning the future sale of leasehold houses and cutting ground rents to zero.
The government will also identify legal loopholes to stop unfair agreements and protect consumers from unrealistic ground rents. They’re also considering changes in the Help To Buy loan rules, so the chosen scheme will only permit purchases of new-build houses with acceptable terms.
To comply with these changes, the government recently recommended the establishment of a Commonhold Council, which will be a partnership of government, industry, and leasehold groups that prepare homeowners to take up commonhold ownership. This model allows homeowners to freehold ownership of their property; this gives them more control over the costs.
The aim here is to reinforce home ownership security and be fair to the 4.5 million leaseholders, and implementing these recommendations is the first decisive step taken by the government.
Conclusion
The legal jargon surrounding property ownership can be overwhelming. Still, thanks to these measures taken by the government, we know that the strife is to reinvigorate commonhold so that homeowners can finally call their homes their own instead of being buried in worries about lease extensions, ground rent, and other costs.
