HCR Law Events

19 November 2021

Continuing challenges for leasehold sellers and buyers

Ground rent

It is well known that leasehold properties have had some rather negative press in recent years with escalating ground rent issues. Historically, many ground rents were set at a nominal level. However, in recent years ground rents have risen from theoretical levels to more than 0.1% of the property’s value. 

These problems have left leaseholders in the unenviable position of being involved in long and convoluted transactions which can often leave parties frustrated and out of pocket, owing to costs incurred for deed of variation documents, indemnity polices and the like. These issues continue, with some leasehold owners being unable to sell their properties owing to the refusal of freeholders being willing to enter into a deed of variation, differing the ground rent provisions to satisfy current mortgage lenders’ requirements.  

The good news

The Leasehold Reform (Ground Rent) Bill [HL] looks to put an end to ground rents for new, qualifying residential long leasehold properties in England and Wales. This is part of the most significant changes to property law in a generation. 

The government has said that they firmly believe that the Bill’s provisions will lead to fairer, more transparent homeownership for thousands of future leaseholders. This is the first part of two-part legislation to reform the leasehold system. The Bill focuses specifically on ground rent clauses within future long residential leases, and further leasehold reform is to follow later in this Parliament; details of the Bill are here. 

The not so good news

It is understood that the current Bill will only apply to new leases and will not help existing leaseholders faced with escalating ground rents.  Concerns have been raised in this respect and it is hoped that the government will address this urgently.


EWS1 certificates 

After the Grenfell Tower fire, the government established the Building Safety Programme to ensure that residents of high-rise residential buildings are safe, and feel safe from the risk of fire.,  While this is good news, there are now unfortunately further delays for leasehold sellers and buyers.  So what does this mean for both sellers and buyers who are frustrated that these are not available in a management pack, and that their transaction is again becoming long and drawn out.

What are they?

An EWS1 certificate is an External Wall System Fire Review certificate. 

How does it affect me as the seller?

If you are a leaseholder selling or remortgaging an apartment in a multi-storey, multi-occupied residential building, you will need to supply one of these to your buyer or mortgage lender to be able to proceed with the transaction.

How does it affect me as the buyer?

If you are a buyer purchasing an apartment in a multi-storey, multi-occupied residential building your solicitor will need to be provided with a certificate to satisfy everyone involved in the process that the building is safe

Does each flat/ apartment have to get an individual EWS1 form for selling, buying, or remortgaging?

No. Each EWS1 form is valid for an entire block/building. Each block will require its own EWS1 form. The form is valid for five years. 

Can the buyer or seller initiate the EWS process if the building owner has not done so?

The building owner should undertake this process. Sellers should be in contact with the building owner or their agent to ensure this takes place as quickly as possible. Then not only will they know that they are safe in their home, but when they sell their property, they can also provide the certificate to the buyer.

When did these certificates become a requirement?

The Royal Institute of Chartered Surveyors (RICS) and mortgage lenders jointly created the EWS1 form. It was launched in December 2019.

Why are they so important?

The EWS1 form itself certifies that the external wall cladding system has been assessed by someone who is suitably qualified to do so.  It enables mortgage lenders to assess the external wall safety of buildings.


Important things to remember!

For the seller

Check your lease terms and discuss with your solicitor whether you think the ground rent provisions could be an issue for a buyer/mortgage lender. Speak with your managing agent/freeholder and obtain a copy of the EWS1 certificate.  If it is not available, ask what stage the process is at. 

For the buyer

Ensure that you obtain confirmation from the selling agent that an EWS1 certificate is available before looking to push ahead with a transaction. If this is not available, your solicitor will not be able to process to exchange/completion. Once your solicitor has a copy of the lease, discuss the ground rent provisions to see whether these could cause an issue for you and your mortgage lender.  

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About the Author
Laura Upshall, Head of Residential (ACILEx), Thames Valley

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