Excessive ground rent fees have often been problematic, not to mention expensive, for leasehold property owners, especially where leases include provisions for fees to increase exponentially every so many years.
This has affected some leaseholders’ ability to afford the fees or to sell on their properties as many would-be buyers can be put off by the expensive ground rent fees.
The Leasehold Reform (Ground Rent) Act 2022 makes a major change to the rules surrounding ground rent fees, something the Government has hailed as part of the most significant changes to property law in a generation.
The Act, which comes into force on June 30, 2022, will put an end to ground rent fees for people entering into new leases and ensure that they cannot be charged more than a peppercorn rent.
For new residential leases entered into on or after June 30, 2022 ground rent fees will be abolished on new residential long leases for properties in England and Wales.
The aim is to make owning a leasehold property fairer and more affordable for the leaseholder and to fulfil the government’s commitment to set future ground rents to zero.
Some types of leases are excluded from the Act including retirement properties (until April 1, 2023), statutory lease extensions and business leases, home finance leases and community housing leases.
It will be of great benefit to people looking to buy a new leasehold property, as after June 30, 2022 they cannot legally be charged ground rent fees.
Unfortunately, as the Act will only apply to new leases, it will not apply retrospectively, so leaseholders with leases already in existence will not benefit unless an existing lease is surrendered and re-granted, in which case the Act may apply.
Freeholders will have to ensure that they comply with the new rules when re-granting or extending the terms of an existing lease. Fines of up to £30,000 can be imposed on freeholders who charge ground rent in breach of the Act.
If your new lease demands ground rent, you must ensure it is not for more than one peppercorn per year and that no admin fees are charged for collecting the peppercorn rent.
Leases entered into prior to the new law coming into force can still provide that ground rent is paid as the Act only applies to new residential long leases on or after June 30, 2022.
This is only the first stage of an ongoing process by the government to reform this area of law. Whether ground rent will be payable for leases in existence before the Act comes into force is something they will be addressing in the future.
Hillfort Law Firm is a specialist residential conveyancing firm and can assist with any leasehold queries you might have. For further information on the subject or any other conveyancing matters, please contact info@hillfortlawfirm.com or call us on 01473353848.
The content of this article is for general information only. It is not to be taken as legal advice. If you require any further information in relation to this article please contact Hillfort Law Firm. Law covered in this article is current on June 30, 2022.
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