The Association of Leasehold Enfranchisement Practitioners (ALEP) has commented on new legislation designed to protect leaseholders that will ban ground rents on new leasehold properties.
The Leasehold Reform (Ground Rent) Bill has received Royal Assent, making it an Act of Parliament.
The new Act, (which is not in force yet) will apply to leasehold properties in England and Wales. It will restrict ground rent owed on new leases to a ‘peppercorn’ rent – effectively zero – and aims to make leasehold ownership “fairer and more affordable”.
Mark Chick, ALEP Director, said:
“ALEP recognises this new legislation, which was first promised back in 2017. Once in force, it will serve as a step towards the government’s proposed agenda for change in this area.
This Act will bring an end to ground rent for new leases and will address the issues arising out of the ‘leasehold scandal’, where doubling of ground rents on newly-created leases created an iniquitous situation for homeowners who had been sold leasehold houses with an escalating ground rent.
What is noteworthy is that this Act does not deal with the banning of leasehold as a tenure for houses, as was originally promised by the then housing minister Sajid Javid. That, together with the prospect of wider reform, is still ‘in discussion’ and it remains to be seen how and when such further changes will be acted upon by government.”
Commencement of the Act is planned within six months and once in force freeholders will not be able to impose any kind of ground rent in a new lease, whether on the renewal of an existing lease, or when selling new properties as leasehold.
Mark continued:
“This is all part of a wider programme to make leasehold unattractive for new properties and eventually, to pave the way for commonhold.
Although the new law will abolish ground rents on new leases, it does not affect existing leaseholders. Leaseholders who face high ground rents and want to get rid of them will need to follow the statutory leasehold enfranchisement process.
We look forward to hearing details from Government with detail as of its plans on the topic of broader leasehold reform, which we expect later in this Parliament.”
2 Responses
ALEP’s comments saying there will be no ground rent on the renewal of long leases is wrong . Section 6 of the 2022 Act allows the existing ground rent to be continued in a renewed leases for the duration of the original lease . This only applies for voluntary lease extensions not statutory extensions
Martin – happy to clarify the position re Section 6 – but all brand new leases (where there hasn’t been a lease before) will be at a zero rent. Agreed, a supplemental lease or a surrender and a regrant may keep the old rent for the remainder of the contractual term of the existing lease – if of course the tenant will agree that. But in any new ‘extension’ of the term the rent must be zero.
Mark