The Leasehold Reform (Ground Rent) Act 2022 restricts ground rents on newly created long residential leases to an annual rent of one peppercorn, a token of no financial value. The new law comes into effect on June 30 – but if you’re buying a new property on leasehold you should talk to your solicitor or conveyancer about these changes now.

The new law means that:

  • Ground rent charges will be banned on most new residential leases from June 30, 2022.
  • A ban will be introduced to end increasing annual costs.
  • This is the first step in a number of other planned reforms.

The government has said in its recent press statement:

“Future homebuyers will see their prospective property bills reduce in just over two months, when the government’s ban on charging ground rent on new leases in England and Wales comes into force.

“The government is taking action to rid future homeowners of annual costs – known as ground rent. Sometimes worth hundreds of pounds a year, these charges provide no clear service in return and can be set to escalate regularly, with a significant financial burden for leaseholders.

“From 30 June 2022, anyone buying a home on a new long lease will now be freed from these annual costs, helping homeowners manage their bills as they face cost of living increases.

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

“In preparation, many landlords have already reduced ground rent to zero for homebuyers starting a new lease with them. Anyone preparing to sign a new lease on a home in the next two months should speak to their landlord to ensure their ground rent rate reflects the upcoming changes.

“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.

“In addition, thousands of existing leaseholders have also already seen a reduction in their inflated ground rent costs. In a government crackdown, the Competition Market Authority (CMA) secured commitments with major homebuilders to stop doubling ground charges every year for leaseholders.

“Those who own properties with Aviva, Persimmon, Countryside Properties, Taylor Wimpey and others will see their ground rent returned to the rate it was when they first bought their home. The CMA’s investigation is continuing into Barratt Developments, Brigante Properties and the investment group Abacus Land and Adriatic Land.

“The ban on landlords charging ground rent on new residential leases, announced today, will also apply to retirement homes. This will come into force no earlier than 1 April 2023 and more details will be confirmed in due course.”

(Quoting government press statement)

Tom Togher

Salford Citizens Advice

May 2022