Important changes to the law governing ground rent on leasehold property
The Leasehold Reform (Ground Rent) Act 2022 came into form on 30th June 2022. This is one of the most significant legislative changes to come into play with regard to leasehold property in recent times
The new law has put a stop to ground rent being charged on new long residential leases for properties in England and Wales.
This means that any new lease of residential property cannot include a charge for ground rent, other than one ‘peppercorn’ per year. In practice, this means that no money is actually demanded.
Importantly, the owners of the freeholds (the landlords) are not able to charge an administrative fee for collecting a peppercorn rent.
There are some exceptions to the new Act, and these include the following:
- certain community-led housing;
- certain financial products; and
- commercial business leases
Retirement properties are not subject to the provisions of the new Act until 1st April 2023.
If a leaseholder is entering into a voluntary lease extension, then the ground rent will be reduced to a peppercorn rent for the extended term of the extended lease. Statutory lease extensions will not however be affected by the new Act.
A fine of up to £30,000 could be applied if the Act is not followed.