Ground Rents Abolished…. (The Times, They Are A - Changin!)
The government has confirmed the abolition of ground rents in residential leases in England and Wales from 30 June 2022 under the new Leasehold Reform (Ground Rent) Act 2022.
In most cases a homeowner will assume that having purchased a property they only need to be concerned about repaying the mortgage. There is no additional payment in the form of rent for occupying it. However, in cases where the property has been purchased under a long lease the homeowner may also be required to pay a ground rent. Typically, the amount of the ground rent is small and should be set out in the lease.
From the 30 June 2022, a new ‘regulated lease’ in England and Wales cannot charge a ground rent of more than “one peppercorn” per year (in other words, effectively nothing). The Act also prohibits leases from charging administration fees for administering the peppercorn rents.
A ‘regulated lease’ is a residential lease granted (i) on or after 30th June 2022 (ii) for a term of at least 21 years (iii) in respect of a single dwelling (so of a flat or a house) (iv) in return for a premium.
The Act only applies to new leases. It does not have retrospective effect and does not, therefore, abolish ground rents payable under existing leases.
There are a number of exceptions to the rules and these include:
Yes and no! Statutory lease extensions for flats are already required to be at a peppercorn rent under existing legislation. Although statutory lease extensions for houses may continue to be at an uncapped ground rent, in January 2021, the government announced that it intended to change this so that ground rent on statutory leasehold extensions of houses will be reduced to zero, too.
For existing leaseholders who choose to extend the term of their leases through the non-statutory (‘voluntary’) route, the effect of the Act is that the ground rent will now be restricted to zero on the newly extended term.
Yes, if a landlord (or an agent acting for a landlord) receives a ground rent which is prohibited under the Act and fails to refund it within 28 days, this is a breach of the Act. Under the Act, a duty is placed on local trading standards authorities to enforce the Act and offenders can be fined up to £30,000 as well as having to repay unlawfully collected ground rents. There are special rules dealing with multiple breaches.
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