Ban on charging ground rent on leases comes into force today

The government’s ban on charging ground rent on new leases in England and Wales comes into force today.

From today, anyone buying a home on a new long lease will now be freed from these annual costs.

Landlords are  banned from charging ground rent to leaseholders, under a new law that the government hopes will lead to fairer, more transparent homeownership for thousands of homebuyers, helping to level up opportunities for more people.

In preparation, many landlords had already reduced ground rent to zero for homebuyers starting a new lease with them.

Leasehold minister Lord Stephen 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.”

Future measures, announced last year, include a new right for leaseholders to extend their leases to 990 years at zero ground rent and an online calculator to help leaseholders find out how much it would cost to buy their freehold or extend their lease.

Commenting on the changes, CILEX (Chartered Institute of Legal Executives) head of policy, Jonathan Walker, said: “The ban on ground rents is positive news for anyone considering buying a leasehold property and important progress towards ensuring safety and security for all householders.

“Problems still remain however, and it is disappointing that there is no retrospective inclusion of current leasehold tenants within the Act. They will still be obliged to pay their existing rents, even in cases where they are seeing those rents escalate – some doubling every ten years. Those attempting to sell on properties will find ground rents prove unattractive to buyers who now have the option of purchasing a rent-free leasehold property, and many will experience difficulties when looking to remortgage, or extend or vary their existing leasehold.

“Such fundamental changes to the leasehold market must be implemented alongside awareness raising and education amongst both consumers and professionals so that both understand the implications for property transactions.

“It is vital that we see a continued programme of reform that benefits those who are new to the leasehold market whilst not disadvantaging or restricting those currently within the system. We hope to see further measures to address residential leasehold houses and cap ground rent for all existing leasehold properties.”

 

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4 Comments

  1. #ImpressiveConveyancing

    Even though the landlord’s headlease might impose a ground rent on them, it cannot be passed on to the subtenants within their new leases

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  2. Ryan Baker

    Would it apply to flats and apartments or just on houses ?

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    1. Ian Narbeth

      It also applies to flats and apartments. I wrote about the opportunity.

      I suspect that landlords who own tens or even hundreds of thousands of freehold reversions with escalating ground rents managed to persuade the minister that their empires needed protecting.

      That said, an unintended side effect of having zero ground rent will be that the freeholds become valueless and in some cases a liability. It is hard enough now to persuade owners and leaseholders to become directors of freehold management companies (whether of common parts shared by freehold houses or of flats). It will become even harder when the company is always on brink of insolvency as it has no income and depends on service charges being paid in full.

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  3. Neil Robinson

    This needs to be extended to commercial property too. I own an office building on leased land, and the costs for it are an absolute rip.

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