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The ban on landlords charging ground rent on new leases in England and Wales comes into force today.
As we reported recently, the Department for Levelling Up, Housing and Communities announced that the ground rent restrictions contained in the Leasehold Reform (Ground Rent) Act 2022 would come into force for most new residential leases on 30th June 2022. The measure ensures that leaseholders of new, long residential leases cannot be charged a financial ground rent for no tangible service.
In anticipation of the ban, many developers and landlords had already reduced ground rent to ‘one peppercorn’ – effectively zero – for new leaseholders.
Leasehold Minister Lord Greenhalgh said, “This is an important milestone in our work to fix the leasehold system and to level up home ownership. Abolishing these unreasonable costs will make the dream of home ownership a more affordable reality for the next generation of home buyers. I welcome the move from many landlords who have already set ground rent on their new leases to zero and I urge others to follow suit ahead of this becoming law.”
Exceptions to ground rent ban
But there are some exceptions to the ban, including:
- statutory lease extensions of houses and flats;
- business leases;
- home finance plan leases; and
- community housing leases.
Although the new legislation will catch retirement properties, this will not happen until at least 1st April 2023. And while the new rules catch voluntary lease extensions, the ground rent restriction only applies from the expiry date of the original lease term.
Also, although the new law applies to shared ownership leases, landlords can continue to charge rent on their share of the property.
Current leaseholders
Perhaps most significantly, the ground rent ban does not affect current leaseholders and therefore provides no immediate statutory help for those caught in the scandal of escalating ground rents, which in some cases are doubling every ten years. These properties are at best difficult but often impossible to sell or remortgage, resulting in these leaseholders being effectively trapped in their homes.
Broader reform
Today’s move forms part of a broader package of reforms which the Government says will make homeownership more affordable, fairer, and secure. Among other measures proposed are a new right for leaseholders to extend their leases to 990 years at zero ground rent. There are also plans for a new online calculator to help leaseholders calculate how much it would cost to extend their lease or buy their freehold.