The Leasehold Reform Bill – Is It Farewell to Ground Rents? | Curtis Parkinson
Leasehold Reform Bill Ist It Farewell to Ground Rents

The Leasehold Reform Bill – Is It Farewell to Ground Rents?

The government introduced the first part of the long-awaited series of reforms to leasehold property law (in England and Wales) in the Queen’s Speech last month. The draft Bill, known as the Leasehold Reform (Ground Rent) Bill, is designed to end the inconsistency surrounding the charging of ground rents to leaseholders of flats and houses.

Heralded by the government as landmark reforms that will prevent ‘ the practice of onerous and escalating ground rents from affecting future leaseholders’, the new Bill will also ‘introduce new rights for Trading Standards to levy penalties on freeholders of up to £5000 for breaches of the law’.

Professional bodies, including the Conveyancing Association, largely support the proposed legislation, hoping that Act will, if passed, put an end to the so-called ‘leasehold scandal’.

Ground Rent

Ground rent is the income a landlord receives on property investment. In recent years many private house building schemes have relied on this income to fund housing developments. Such methods have tied unwitting tenants to leases with debilitating clauses and increasing ground rent charges.

Reform Bill Proposals

In its current form, the Bill will ban long leases unless a peppercorn or token rent is agreed. The Bill also introduces new fines of up to £5,000 per year for any landlord who breaches the law.

Exemptions

The draft Bill does exclude certain types of leases from the reforms, including:

  1. Business leases where people live in the same premises as their workplace
  2. Shared ownership leases
  3. Sections of the community-led housing sector
  4. Financial products that are dependent on leasehold agreements

Existing Leases

Ground rents charged under existing leases are unaffected, as the proposed legislation will not apply retrospectively. However, the Bill includes recommendations to deal with granting a new lease following the expiry of an old one.

Furthermore, it seems that it may be possible to apply the new regulations to an existing lease that is ‘varied’. For example, if a tenant proposes a lease plan alteration to enlarge his premises, the lease may be classed as new under the new rules once works are complete. The new lease would fall under the new regulations rendering the ground rent provisions within the old lease unenforceable.

Looking Ahead

Complaints about excessive and unfair ground rent aren’t new. Indeed, many high street lenders have refused to lend against leases affected by increasing ground rents. Whether it’s the result of relentless lobbying from the media and professional bodies, the proposed reforms under this draft Bill go some way to implementing the proposals put forward by the Law Commission to reform leasehold. And there’s the promise of more reforms to come.

The Bill was brought before the House of Lords for its first reading on 12th May; it’s not clear when it is likely to become law.

Our Advice

Our lawyers have many years of experience advising clients on problematic ground rents such as doubling ground rents, along with related issues and lease extensions generally. For more information or advice, please contact us. We’re here to help.

Please note that all views, comments or opinions expressed are for information only and do not constitute and should not be interpreted as being comprehensive or as giving legal advice. No one should seek to rely or act upon, or refrain from acting upon, the views, comments or opinions expressed herein without first obtaining specialist, professional or independent advice. While every effort has been made to ensure accuracy, Curtis Parkinson cannot be held liable for any errors, omissions or inaccuracies.

Partnerships & Accreditations