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Ground Rent Zero - the Government's Response to Consultation on Leasehold Reform

  • United Kingdom
  • Real estate
  • Real estate litigation

01-07-2019

The Secretary of State for Housing, Communities and Local Government, James Brokenshire, has published the Government’s response to the consultation on leasehold reform.

Described as delivering on the Government’s manifesto pledge to “crack down on unfair practices in leasehold and revitalise the leasehold and commonhold market” the response confirms that legislation will be brought forward to implement a ban on new leasehold houses, and the abolition of ground rents, which were both first announced in December 2017. 

The initial consultation had suggested that the Government was considering a £10 per annum cap on ground rents but this response makes clear that future ground rents must have zero financial value.

There are some limited exceptions to both the ban on leasehold houses and the nil rate ground rents for example retirement properties and equity release schemes will not be subject to the ban. However, in the case of retirement properties, prospective leaseholders must be given the choice of paying a higher purchase price in exchange for a peppercorn ground rent, and the exemption will only apply where event fees are not used.

Legislation will be brought forward “as soon as Parliamentary time allows”.

  • following the legislation coming into force it will not be possible to register a non-compliant long lease of a house at HM Land Registry, and leaseholders will be entitled to enfranchise (acquire the freehold) for no cost if a lease is found to be contrary to the ban
  • leases with ground rents above a peppercorn will be unenforceable and the court will have the power to impose a fine on freeholders who have set ground rents contrary to the legislation
  • there will be no transitional period after the legislation comes into force and the ban will apply to all freehold land (regardless of when it was acquired) and any leasehold land acquired from 22 December 2017 onwards.