Government promises to cut ground rents

Government promises to cut ground rents

0:01 AM, 10th November 2023, About 6 months ago 4

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The government has announced plans to slash ground rents and save homeowners thousands of pounds.

Housing Secretary Michael Gove has launched a consultation that aims to cap ground rents at a so-called “peppercorn” rate for existing leaseholders, freezing ground rents at current levels and capping the ground rents at a percentage of the property value.

The government says it is delivering its manifesto pledge to create a fairer system for millions of leaseholders.

Burdened with onerous ground rents

Confirmed as part of the Leasehold and Freehold Bill in the King’s Speech the Department for Levelling Up, Housing, and Communities (DLUHC) will consult on proposals to decide the best way forward to benefit leaseholders.

Secretary of State for Levelling Up, Housing and Communities, Michael Gove said: “People work hard to achieve the dream of homeownership. They plan, toil, sacrifice, save and should rightly be proud to get on the housing ladder.

“However, far too many are burdened with onerous ground rents – these punitive charges can leave some paying thousands of pounds a year for nothing in return.

“Ground rent can feel like an annual reminder that you do not own the land your home stands on, that your lease on it is finite, and that there is a payment for the privilege of staying there.

He added: “Today we are taking further steps to right that wrong – consulting you, the public, about how best to change this system so leaseholders are not exploited any longer and can take back control of their own destiny.”

Transparency over service charges

The government say the proposals introduced in the Leasehold and Freehold Bill will make it cheaper and easier for people to extend their lease or buy their freehold.

There will also be greater transparency over service charges and insurance commissions.

The public consultation will be open for six weeks and can be viewed here.


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Comments

Jim K

18:22 PM, 10th November 2023, About 6 months ago

Interesting take on a lease with a finite end.
"Ground rent can feel like....".
Er.
What did you purchase?
I am the 'owner' of a leasehold property btw.

Reluctant Landlord

20:41 PM, 10th November 2023, About 6 months ago

another case of a contract between two parties where the 'tenant' did not read all the small print????

Buyer beware applies to everything! READ THE LEASEHOLD CONTRACT!!!

Easy rider

10:28 AM, 11th November 2023, About 6 months ago

Government promising the world ahead of a General Election - safely in the knowledge that they won’t be in power to deliver (and wouldn’t deliver even if they were in power).

Gove losing his seat would be the best TV I can imagine on election night.

Come on Surrey Heath.

His bio is an interesting read on wiki.

Lord Luncan

22:13 PM, 12th November 2023, About 5 months ago

The government took leading counsels advice on the landlords human rights to compensation. They were advised the capping a rent at 0.1% of the properties value may stand a chance if it can be shown that the premium paid for the property did not reflect the ground rent terms ( how you prove that would be challenging). If the premium paid did reflect the ground rent terms ( often in a non statutory lease extension) then there is a high chance of a successful challenge by the landlord at the European Court

The government appear to have ignored this advice and gone for a very confrontational stance , which suggests that they are playing to the gallery in front of 5 million voters who are leaseholders, promising wonderful things knowing there is not enough time or they are blocked by the European Court from delivering such marvellous news.

Also, if the government were truly passionate why did they not make changes in the Leasehold Reform ( Ground Rent ) Act 2022 - an amendment was proposed making existing ground rents a peppercorn in its passage through Parliament but failed on the first reading.

Ground rent was very small sum of £1 or so in 1900. But in 1900 a household income in the industrial parts of the north was around £1 per week ( £50 per annum) . Today it would be around £700 - it is misleading of Gove to state this in his preamble

Ground rent is an integral part of the consideration a developer/ freeholder seeks on the granting of a lease. It is well set out in the contract and the leaseholder is legally represented BEFORE signing up to it. It is challenging to see how this can be scrapped without any compensation to those who have relied on 300 years of property law, believing that the covenant to pay would be upheld.

If this was to succeed would AST rents be capped as tenants don't have legal representation when they sign the lease ?

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