Goodbye Ground Rent! (for some)

The Leasehold Reform (Ground Rent) Bill (awaiting royal asset) will implement the governments objective of capping ground rent for all long residential leases to a peppercorn. This comes as a response to the Law Commission Report of 2020.

Ground rent explained

Ground rent is charged under a long lease by the landlord, to the tenant. Entirely separate from any relevant service charge, the landlord provides no service in return for the ground rent. Historically, ground rents have been low (£50/£70 per year) but with increasingly more new homes being sold as leasehold properties, ground rent has increased to up to £500 per year in some cases.

Which leases will be affected?

The changes apply to long leases (leases of 21 years or more) of flats and houses granted on or after the date the Bill comes into force with the important exception of leases granted out of contract entered into prior to the commencement date.

The following long leases are exempt from the new proposals:

• Business leases
• Lease extensions under existing statutory rights
• Community housing
• Home finance plan leases

Shared ownership leases will be caught to the extent of the tenants interest.

Under the Bill, any rent in respect of long leases will be prohibited. Trading Standards authorities will be responsible for enforcement. Tenant will also be able to bring a claim in the first tier tribunal for a recovery order, requiring the landlord to repay any ground rent paid in contravention of the provisions of the Bill.

Unfortunately, the Bill offers no respite for existing leaseholders who remain locked into agreements that curtail their financial freedom.

Contact our Real Estate Dispute Resolution  team today

If you would like to discuss any issue relating to this blog, please do not hesitate to contact a member of the Real Estate Dispute Resolution Team on 01895 207835 or 01895 207295, or email us at propertydisputes@ibblaw.co.uk