Leasehold reforms: Ground rent caps set at £250, phased out over 20 Years

Michael Gove’s plans to abolish leasehold have been scaled back, with a compromise reached to cap ground rents at £250 annually.

Despite Treasury resistance, Rishi Sunak overruled objections, signalling a partial victory for Gove. The decision, expected to be announced imminently, aims to alleviate the burden on leaseholders, who have long been trapped by escalating ground rents.

However, the phased approach to phasing out ground rents over two decades may still leave some feeling short-changed. Yet, Downing Street asserts that this move aligns with the Conservative manifesto’s commitment to reduce ground rents to a nominal rate, even if the timeline has been elongated.

This compromise is set to be integrated into the Leasehold and Freehold Reform Bill currently under parliamentary scrutiny. Commenting on the imminent amendment, Mark Chick – Partner, Bishop & Sewell LLP and a director of ALEP (Association of Leasehold Enfranchisement Practitioners) said that some will say that this proposal does “not go far enough” and that Government “should be aiming for a complete ban on ground rents”. He added:

“However, it seems very clear that the human rights considerations have been taken into account in coming to this proposal – and the realisation that a complete ban would more likely than not to lead to significant compensation claims having to be paid. The government no doubt wants to avoid having to pay a reported £27.3 billion to compensate freeholders for lost assets.

It may well be that some will consider that £250 is perhaps an unfair figure when applied across the board – and that it does not reflect relative values whereas perhaps a 0.1% (or other percentage) cap relative to value might. If the cap at £250 is right, one can only assume that government has been swayed by the suggestion that resolving disputes about the fraction of value might cause cost and delay.

However, for freeholders this is perhaps better news than an outright ban. I wonder whether there will be any differential between central London and elsewhere? Also the Sunday Times article suggests that there will be a phasing out over time. How long will this be? Will there be a reduction down to zero? Either would  have a significant impact on the long-term value of freeholds. Government has clearly undertaken a balancing act between the human rights considerations of ‘deprivation’ and ‘control’ of property in seeking to find a balanced solution. We will have to wait for the formal outcome of the consultation to know what the true position is.”

What’s more, Propertymark is pleased to see the amended proposals incorporate additional standpoints such as a continued review regarding the implementation of tenancy measures, along with aspects such as a firm commitment to undertake and publish an annual parliamentary update regarding the health of the private rented sector to better understand issues and plan for future provision.

Propertymark continue to promote the concept that agents must be expected by law to be fully qualified and operate within a framework that brings industry wide levels of protection for consumers. Timothy Douglas, Head of Policy and Campaigns at Propertymark, commented:

“Throughout the passage of the Bill, Propertymark has worked hard to highlight the importance of retaining fixed-term tenancies and the need for improvements to the court system if the abolition of Section 21 is to work. Whilst these amendments show that Ministers have listened to our concerns there are still areas that need further clarity.

We are continuing to engage with officials at DLUHC, the Minister and Parliamentarians as the Bill moves to its next stage.”

14 Responses

  1. English Medieval Leasehold, is a scam system, making money for wealthy builders. Trapping unsuspecting elderly investors buyers into flats, they are then stuck with. As no one wants leasehold. Should be banned, changed for free to freehold. Medieval terrible worst housing law in Europe

    1. Those who make a deal to buy on leasehold know they are getting a property cheaper and have to live with the consequences

      1. No they don’t and it’s rarely much cheaper and priced to trap people. We don’t need it or want it. It’s not home ownership it’s a scam. The only person who should own the home is the one who paid for it and is spending a life to do! – not the one who by hook or by crook acquired the deeds for next to nothing. And of course this cheapness myth doesn’t apply to flats!!

      2. That’s an arrogant statement. Some of us simply cannot afford houses. I bought a flat as that was all I could afford. Stop being so crass.

  2. Great! But too late for me as I am about to pay freeholder £12900 for a Deed of Variation to the able to exhange contracts on my property.

    1. Those who buy leasehold know what they are doing just like those who rent a property know they will never own it

      1. As above. Plus in order to know about what you are really getting into you need to understand complex laws which is just ridiculous and another clever trap.

  3. As someone who owns a property with a hideous escalating ground rent I can’t tell you what a relief this is. DARRELL – you have no idea how easy it was to fall into this trap. My ‘professional’ conveyancer didn’t even pick up on it and most decided to ignore it because they didn’t see what a problem it would become. If the so called professionals didn’t understand the consequences then what hope did we have? And no, we are not all morons, just normal people who trusted our lawyers.

  4. I look forward to the day leasehold’s are banned. They are outdated and a means for freeholders to make money for doing nothing. It would cost me around £15K to get my lease extended as it has to few years remaining and it’s less desirable to buy.

  5. Even though not ideal £250 cap is much better than it doubling every 10 years and this is coming from someone who is impacted by this. And 20 years is plenty of time for pension funds to diversify their portfolios as that seems to be their excuse for not backing it being abolished

  6. Darrell you have much to learn.
    Since our freeholders have changed our service charges have increased from £3,800 to £8,600 this last year plus the ground rent was already much higher than it should have been at £4,000 (with only upward reviews) the freeholders have sought an increase to £33,600 per annum?
    Then you have to add on the costs in fighting this injustice with a surveyor and solicitor.
    The Leasehold Reform Bill changes are well overdue as freeholders have been pushing the limits much too far for much too long now.
    To some leaseholders who have been holding on Michael Gove and his colleagues in government and the House of Lords, these are our great hope for the future.

Want to have your say? Leave a comment

Your email address will not be published. Required fields are marked *

Read more stories

Join over 7,000 conveyancing professionals – Check back daily for all the latest news, views, insights and best practice and sign up to our e-newsletter to receive our daily and weekly round ups

You’ll receive the latest updates, analysis, and best practice straight to your inbox.