How ‘The Leasehold Reform (Ground Rent) Act 2022’ Affects You

The Leasehold Reform (Ground Rent) Act 2022 comes into force on 30 June 2022, which means ground rent changes and also lease extension changes, Brady Solicitors explains the impact below.

The Act applies to residential leasehold properties in England and Wales and will prevent freeholders from charging more than a ‘peppercorn’ ground rent (ie: zero) on all new leases. It is part of the government’s proposals to make leasehold ownership “fairer and more affordable”.

Is Ground Rent Being Abolished?

The ground rent ban on new leases includes lease extension changes. Those granted as part of an informal – or voluntary – lease extension process, bringing them into line with statutory lease extensions where the ground rent is already set at a peppercorn rate. This is an interesting development for leaseholders and freeholders considering informal leasehold extension arrangements.

Ground rent may still be charged for the remainder of the old lease but must then be set to zero for the period added to the lease.

Are any leasehold properties affected by the ground rent changes?

The zero ground rent rule only affects new leases – so those granted on new build properties or through a lease extension.  Business leases, home finance plan leases, and community housing leases will not be affected by the Act.

Other lease extension changes include, leasehold retirement properties becoming subject to zero ground rent on new leases – but not before April 2023.

Will there be penalties for freeholders as a result of ground rent changes?

Freeholders could be liable to fines of up to £30,000 for collecting ground rent on new leases after 30 June 2022. The Act also includes ‘anti-avoidance provisions’ to stop freeholders from using administration fees to recover ground rent.

Andrea White, Lease Extensions team leader at Brady Solicitors comments on the lease extension changes:

“We have been watching the government’s leasehold reform plans with interest and welcome the introduction of zero ground rent on new leases. Whilst the informal lease extension route has generally offered more speed and flexibility, there has always been the risk that the freeholder may try to impose a higher ground rent as part of the lease extension terms.

“These new rules bring informal lease extensions in line with statutory lease extensions when it comes to ground rent and should encourage leaseholders to move forward with their lease extension plans with renewed confidence.

“There is however not much time for either party – freeholder or leaseholder – to prepare for the new rules on 30 June, and we would encourage anyone with a ‘live’ lease extension to seek professional advice to understand their position.”

Need advice on ground rent changes?

Brady Solicitors offers specialist legal advice to leaseholders seeking to extend their lease. For help or advice on your lease extension project, including how the new rules will affect an ongoing lease extension claim, please do get in touch.

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