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Clarke & Son Blog

Leasehold Reform (Ground Rent) Bill 2022

 

On 8 February 2022, the Leasehold Reform (Ground Rent) Bill received Royal Assent.

 

The Leasehold Reform (Ground Rent) Act 2022 when fully in force, will limit the ground rent chargeable on most new long residential leases to one peppercorn per year. This will effectively restrict ground rents to zero financial value. The Act also bans freeholders from charging administration fees for collecting a peppercorn rent. The intention is to make leasehold ownership fairer and more affordable for leaseholders.

 

The Bill will only apply to new leases and will not assist existing leaseholders faced with high and escalating ground rents. Special rules will apply to shared ownership leases and leases that replace pre-commencement leases (such as voluntary lease extensions).

 

There are a few types of leases that are exempt from the ground rent restrictions. The Act will not apply to business leases, statutory leases, statutory lease extensions of flats and houses, community housing leases and home finance plan leases.

 

The provisions of the Act will come into force on a date yet to be specified by the relevant Secretary of State. The Secretary of State may appoint different days for different purposes, including for different kinds of leases.

 

The Act has not been fully commenced because time is needed to prepare regulations. Government Minister Lord Greenhalgh has given a commitment that it will be fully commenced within six months of Royal Assent with the exception of retirement home leases. This is due to the fact that ground rents are often used to help fund the additional costs such as providing communal spaces and facilities so there will need to be additional time for transition.

 

Trading standards authorities will be able to impose financial penalties of between £500 and £30,000 for breaches. They will also be able to order the Landlord to refund any unlawfully charged ground rents and Leaseholders will be able to recover unlawfully charged ground rents through tribunals in England and Wales

 

Realistically, this marks the end of ground rent charges under new residential long leases and Landlords need to be aware of this to avoid being penalised when the legislation takes effect.

 

If you have any queries regarding new leases or lease extensions then please do not hesitate to get in touch with Rebecca Ham via email: mail@clarkeandson.co.uk or call at 01256 320555.

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