Industry reacts to arrival of Ground Rent Act

Following the arrival of the Leasehold Reform (Ground Rent) Act which came into force last week, Today’s Conveyancer has rounded-up the reactions of professionals across the industry.

The Leasehold Reform (Ground Rent) Act came into force last week (30 June) and is set to restrict ground rents on most new long residential leases in England and Wales to the value of zero, or as otherwise known, a token “peppercorn” rent per year.

Although the new law effectively abolishes ground rents on new leaseholds, it does not currently extend to existing leaseholders. A second bill has been promised to address issues with existing leases.

Dominic Danvers, Property Litigation Solicitor, CLG, commented:

“The Leasehold Reform (Ground Rent) Act 2022 comes into force today for all new leases.  It will mean that leaseholders will not be required to pay more than a peppercorn ground rent for those leases.  This will be hugely welcomed, having been campaigned for over many years.

While the Act will prevent escalating ground rent for new leases in the astronomical way that many have done to date, it still needs to go further to incorporate existing leases not just new ones.  It is also possible for leaseholders to be caught out, for example if they opt for a voluntary lease extension (rather than a statutory one), the new Act will only apply from expiry of the original term.

Getting rid of the loopholes and applying the Act to existing leases will of course present some legal challenges – which is why these have not been included –  but this doesn’t mean that it shouldn’t be tackled. It is essential that steps are taken now for a peppercorn ground rent to be applied to all residential leases both existing and new.”

Natalie Bradley, partner in the residential property department at Stephensons said:  

“For thousands of people, spiralling ground rents have plagued their experience of homeownership. Unfair and often complex leasehold arrangements have placed significant strain on household finances and in some cases have even made their homes unsellable.

Leasehold and ground rent reform has been long overdue and these changes will help pave the way towards a fairer and more transparent approach to homeownership.”

Shilpa Mathuradas, head of property litigation at Osbornes Law, said:

“While any reform of the antiquated leasehold system is to be welcomed this new legislation could well create a two-tier system in which older leaseholds become more difficult to sell. As the new law only applies to new leases, it leaves those already paying onerous ground rents or doubling rent clauses to suffer. It is crucial that the government sets out a timetable for the second stage of leasehold reform, including abolishing ‘marriage value’ and allowing homeowners to extend their leases with zero ground rent for 990 years, so that all leaseholders are freed from a system that is no longer fit for purpose.”

Finally, in a statement released last week the National Leasehold Campaign commented:

“We celebrate the Leasehold Reform (Ground Rent) Act 2022 coming into force today as the biggest change to Anglo-Welsh property law since at least 1925, possibly a thousand years. Leasehold is a throwback to serfdom and manorialism, systems where peasants had to do backbreaking manual labour and forever compensate freeholders for living on ‘their’ land.

Banning ground rent on future new-build flats is a long overdue move and brings us much closer to the position in Scotland and the rest of the world, where commonhold schemes flourish, apartment buyers own their homes outright and there is no concept of freeloading freeholders or homeowners paying feudal duties to secretive land barons. Ground rent is pure profit to the freeholder landlord.

While the Act does not directly help the 5 million existing leaseholders in England and Wales, it clears the path for commonhold, a form of freehold flat ownership that the Thatcher, Major and Blair governments sought to have replace medieval leaseholds. A mass shift to commonhold tenure will provide land equality, capital mobility and consumer cost control. At the moment, those of us with leasehold property own and control nothing, but pay for everything, as the horrific building safety crisis has shown.

The coming into force of the Act also heaps pressure on government to let the rest of us cast off our feudal chains. It shames our two nations that this form of legalised robbery still exists in England and Wales when our former colonies and others have long abolished it. We urge prime minister Boris Johnson to back levelling-up secretary Michael Gove and the leasehold minister Lord Greenhalgh in their quest to introduce full-throated commonhold, to make our homes truly our own. Leaseholders are worried sick that they’re being left behind after the Queen’s Speech last month failed to feature the promised second tranche of leasehold reforms that government began working on in 2017. We have had consultation after consultation. The reforms are ready to go, having been handed over to ministers by the Law Commission in 2020. Leaseholders feel they’re being let down in a cost of living emergency, continually being extorted by ground landlords in their own homes.”

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