Ground rent on new residential leases ends today

The Government’s ban on charging ground rent on new leases in England and Wales comes into force today.

The Government’s ban on charging ground rent on new leases in England and Wales comes into force today.

The Government is taking action to rid future homeowners of annual costs – known as ground rent. Sometimes costing 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. Landlords will be banned from charging ground rent to future leaseholders.

In preparation, many landlords have already reduced ground rent to zero for homebuyers starting a new lease with them.

Lord Greenhalgh cladding
Lord Stephen Greenhalgh, Leasehold Minister

Leasehold Minister, Lord Stephen Greenhalgh said, “This is an important milestone in our work to fix the leasehold system and to level up home ownership. Abolishing these unreasonable costs will make the dream of home ownership a more affordable reality for the next generation of home buyers.

“I welcome the move from many landlords who have already set ground rent on their new leases to zero and I urge others to follow suit ahead of this becoming law.”

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.

Industry comment
Shilpa Mathuradas-Osbornes-Law
Shilpa Mathuradas, Osbornes-Law

Shilpa Mathuradas, head of property litigation at Osbornes Law, said, “While any reform of the antiquated leasehold system is to be welcomed this new legislation could well create a two-tier system in which older leaseholds become more difficult to sell.

“As the new law only applies to new leases, it leaves those already paying onerous ground rents or doubling rent clauses to suffer. It is crucial that the government sets out a timetable for the second stage of leasehold reform, including abolishing ‘marriage value’ and allowing homeowners to extend their leases with zero ground rent for 990 years, so that all leaseholders are freed from a system that is no longer fit for purpose.”

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