A proposal to effectively scrap ground rents for most new long residential leaseholds in England and Wales has moved one step closer to becoming law after passing its third reading in the House of Commons yesterday, but an amendment, which would have seen ground rent removed for all existing properties, was defeated by 306 votes to 162.

The amendment was tabled by Mike Amesbury, shadow minister for Housing, Communities and Local Government, designed to reduce ground rent to a peppercorn rent in existing long residential leases.

The bill currently only restricts ground rents on most newly-created long residential leases in England and Wales to a token one peppercorn per year, which effectively restricts them to zero financial value, but not for existing leaseholders, after the majority of MPs – mostly from the Conservative party – rejected the proposed changes.

The only stages now remaining before the bill comes into law are consideration of amendments and royal assent.

Commenting on the Leasehold Reform (Ground Rent) Bill passing its third reading in Parliament, Jonathan Frankel, head of the property litigation department at Cavendish Legal Group, said: “The defeat of the amendment aimed at removing ground rents from all existing leasehold properties means that when this bill becomes law it will not provide a remedy for the millions of owners of leasehold properties trying to address difficulties with their ground rents.

“There is good news for newly-created leases, which will be limited to a nominal ground rent of one peppercorn per year. Existing leaseholders, however, will instead have to find their own legal solutions and exercise their right to claim a statutory lease extension in order to turn their ground rent into a peppercorn.”

Also in response to the passing of the third reading of the Leasehold Reform (Ground Rent) Bill yesterday, Linz Darlington, who is the CEO of lease extension specialists Homehold, said: “In January 2021, the government promised to introduce changes to leasehold which would resolve injustices for those owning existing leasehold properties. This promise, while welcome, creates greater uncertainty for leaseholders while they wait for legislation.

“Despite the wide support from members of the house, the government response was lacklustre. Eddie Hughes’ (The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities) response was that “given that we have just gone through two years of a rather unexpected global pandemic, it is best not to pin these things down too firmly”.

“Until the government commits to a timeline for wider reforms, it actually puts many leaseholders in a worse position. For example, if you are a leaseholder who is left in a unmortgageable and unsellable flat because of a short lease or a high ground rent, you are left in a limbo – do you pay more to resolve the issue now, or put your life on hold to wait for changes which might make it fairer in the future?

“The rejection of this bill by a majority of 144 votes will be very disappointing to leaseholders and those campaigning for leasehold reform. This was summed up by Sir Peter Bottomley, who voted with his party but stated afterwards “I am sorry that I got back in time to vote on new clause 1 – I probably voted in the wrong way and I apologise for that”.