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Are Ground Rents a Thing of the Past?

on Thursday, 23 June 2022.

The Leasehold Reform (Ground Rent) Act 2022 which comes into force on 30 June 2022 will put an end to ground rents on all new leases.

We all remember the articles in the papers about those individuals who bought new properties, usually leasehold houses, where the landlords had set the ground rents so high that the owners have struggled to find buyers who can afford to take on the high ground rents.

This Act will stop landlords from being able to do this in the future. From 30 June 2022 onwards where a landlord is granting a new lease of a property for a period of 21 years or more, they will not be able to charge a ground rent. There are some properties which the Act will not apply to, like shared ownership leases. In fact the Act goes further than this - they will also not be able to circumvent the collection of ground rent by charging an administration charge. This is great news for anyone about to buy a new lease.

Does This Apply to Existing Leases?

Unfortunately, the Act does not apply retrospectively, so existing leases will not be changed  by it. For those individuals who already have a ground rent in their lease, they will have to continue paying it, unless they decide to extend their lease.

If they decide to extend their lease informally with their landlord, their landlord can continue to charge ground rent to the end of the existing term of the lease but  then no ground rent would be payable for the new extended term .

If this is still not an attractive prospect for some leaseholders, an alternative is to  apply to extend their lease using the statutory procedure which is available to leaseholders who have owned their property for two years or more. This process will enable the leaseholder to extend their current lease by 90 years and reduce their ground rent to zero immediately for the remainder of their lease.

If you are interested in discussing a lease extension, please contact Christina Le Riche in our Conveyancing team on 020 7665 0929.

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