Leasehold Reform (Ground Rent) Act 2022

Friday, April 22nd, 2022

At a glance:

The Leasehold Reform (Ground Rent) Act 2022 has now received Royal Assent and will come into force later this year. Partner Steven Bannell provides an update below.

 

Whilst the government had previously announced an intention to make wider reforms to leasehold legislation, this act is very narrow in its scope and focusses purely on Ground Rents.

This legislation (which will come into force from 30 June 2022) will outlaw new ground rents from being collected by landlords. Once commenced, any new leases granted following that date (when negotiated informally with the landlord) must not contain a provision for the tenant to pay a ground rent to the landlord of a sum greater than a peppercorn (i.e. nil).

Whilst at face value, this may appear to be a victory for leaseholders, unfortunately the act may not have much practical effect. Major developers such as Wimpey, Countryside and Barratt Developments had all announced in December 2020 that they would no longer collect ground rent on new leases. The act wil also not help leaseholders who currently pay ground rent, even if they obtain “new” extended leases as the zero ground rent provision will only take affect from the period of the extended term and not from the commencement of the new lease.

Separate provisions are included for shared ownership or retirement home leases and statutory lease extensions will remain unchanged.

 

What remains outstanding?

The government has previously stated that future legislation will

  • Reform the process of enfranchisement valuation used to calculate the cost of extending a lease or buying the freehold.
  • Abolish marriage value.
  • Cap the treatment of ground rents at 0.1% of the freehold value and prescribe rates for the calculations at market value. An online calculator will simplify and standardise the process of enfranchisement.
  • Keep existing discounts for improvements made by leaseholders and security of tenure.
  • Introduce a separate valuation method for low-value properties.
  • Give leaseholders of flats and houses the same right to extend their lease agreements “as often as they wish, at zero ground rent, for a term of 990 years”.
  • Allow for redevelopment breaks during the last 12 months of the original lease, or the last five years of each period of 90 years of the extension to continue, “subject to existing safeguards and compensation”.
  • Enable leaseholders, where they already have a long lease, to buy out the ground rent without having to extend the lease term

 

On 9 June 2021 Lord Greenhalgh said they hoped to bring forward legislation to deal with these remaining issues by the third term of this Parliament.

Please do not hesitate to get in touch should you have any further questions regarding the act and how it may affect your lease.

 

Contact the author:

Steven Bannell, Partner

E: steven.bannell@hanne.co.uk