Ground Rent Reform

The Leasehold Reform (Ground Rent) Act 2022 which is introducing changes to the purchase of residential leasehold properties will come into force on 30 June 2022.

The Act is limiting the ground rent chargeable on most new, qualifying long residential leaseholds in England and Wales. The ban will put an end to increasing annual costs for leaseholders and is the first step in the government’s reform package to create a fairer housing system.

The changes being brought in include:

• Any ground rent demanded being limited to one peppercorn per year. This effectively sets the rate of ground rent to zero. Most future residential leaseholders will find themselves not being demanded to pay ground rent.
• Landlords not being able to charge administration fees for collecting peppercorn rent.
• Landlords in breach of the Act will face fines of up to £30,000
• For existing leaseholders entering into voluntary lease extensions after commencement, the extended portion of their lease will be reduced to a peppercorn.

The Act will also restrict ground rent to zero on retirement properties to make sure that those who live in retirement housing benefit from the same reform as other leaseholders. The changes for retirement properties will not come into force until 1 April 2023.

Business leases (which are defined by the Act as leases of commercial premises which include a dwelling, use of which substantially contributes to the business purposes) are one of the very few exceptions from the Act. Other exceptions include applicable community-led housing and certain financial products.

Statutory lease extensions for both houses and flats remain unchanged and therefore exempt from the provisions of the Act.

If you would like to discuss anything touched upon in this article, then please get in touch with us on 0161 877 8555 for a confidential discussion.