The Consumer Lawyer

New protections for leaseholders in relation to ground rents

new block of flats

Over the years I have heard countless horror stories from residential leaseholders (particularly flat owners), who have faced high and escalating ground rents, and who have therefore struggled to sell or re-mortgage. The common theme I have seen has been either the leaseholder simply did not fully appreciate the long-term cost of ground rent, or the freeholder has levied unreasonable increases, taking advantage of the lack of protections in this regard on the part of the leaseholder.

Gayle from North London contacted me last year in despair, telling me “I desperately need to sell this flat, but the landlord keeps on increasing the ground rent every year and it is putting off buyers. Jumping out of the window feels like the only way out of this place”

Finally, this issue is being addressed thanks to a new law called the Leasehold Reform (Ground Rent) Act, which has been brought in to make owning a leasehold residential property fairer, more transparent, and more affordable. The Government has also set out commitments to set future ground rents to zero, and the Leasehold Reform Act will help to achieve this. However, the changes will not help people like Gayle so more needs to be done.

If you currently own a leasehold property, or are thinking of purchasing a leasehold property, here’s what you need to know:

How does the new law help?

The new law guarantees that if you buy a leasehold property that is covered by the Act, you will never have to pay any ground rent.

Will this apply to my property?

The Act will only apply to long leaseholds, defined as those with a term of more than 21 years, and it is not retrospective, meaning it will only apply to leases entered into after 30th June 2022.

What about existing leases?

Whilst the Act does not apply to existing leases, if there is a surrender and re-grant of a lease, either extending the term of the lease, or adding additional property to the demise as defined in the lease, you will then enjoy the protection of the Act.

Retirement homes

The ban on landlords charging ground rent on new residential leases will also apply to retirement homes, but this will not come until after 1st April 2023.

What next?

We cannot leave people like Gayle out in the cold. The Competition and Markets Authority already determined that landlords have been acting unfairly when it comes to ground rent, so why not pass a law banning ground rents across the board?

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