The Leasehold Reform (Ground Rent) Bill

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The Leasehold Reform (Ground Rent) Bill is said to be the most significant change to property law in a generation and seeks to put an end to ground rent for new, qualifying long residential leasehold properties in England and Wales. It is believed that the Bill’s provisions will lead to fairer, more transparent homeownership for thousands of future leaseholders.

The fruition of the Bill derived from the change in practice in recent years, which has seen the sale of long leases with higher ground rent and shorter ground rent review periods, which can make long leaseholders face onerous and unsustainable ground rent and make it difficult for leaseholders to sell or re-mortgage their property.

Under the Bill breaches of the ground rent restrictions will be considered a civil offence for which enforcement authorities can impose a financial penalty between £500 and £30,000. The Bill also prohibits the charging of administration fees in relation to the peppercorn rents and makes provisions for leaseholders to recover unlawfully charged ground rents through the First-Tier Tribunal in England or the Leasehold Valuation Tribunal in Wales.

The Bill focuses specifically on ground rent clauses within long residential leases, this would mean that if any ground rent is demanded as part of a new long residential leases, it cannot be for more than one peppercorn per year, meaning that future leaseholders will not be faced with the financial demands for ground rent as they currently are now.

The proposals include:

  • Giving leaseholders of residential properties the right to extend their leases by 990 years at zero ground rent
  • Protecting elderly residents by reducing ground rents to zero for all new leasehold retirement properties
  • Establishing a ‘Commonhold Council’
  • Cap the treatment of ground rent at 0.1% of the freehold value and prescribe rates for the calculations at market value
  • Introduce a separate valuation method for low value properties

During the Bill’s passage in the House of Lords, there were concerns that the Bill will not provide assistance for existing leaseholders who are faced with high and escalating ground rents and contained a broad definition of ground rent. Another issue raised was that some landlords may pressurise leaseholders to agree voluntary lease extensions as a means to continue their ground rent arrangement.

However, despite the concerns and issues, the Bill has passed through the House of Lords and is currently awaiting its second reading in the House of Commons. If the Bill is passed through the House of Commons and gains Royal Assent, it would have a significant impact on property law and will make leasehold ownership fairer and more affordable for leaseholders.

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The content of this update is for the purpose of providing general legal information. It does not constitute legal advice from a solicitor and should not be treated as such.