Queen’s Speech 2021 – Leasehold Reform (Ground Rent) Bill

“Laws (to modernise the planning system) will be brought forward, along with measures to end the practice of ground rents for new leasehold properties.”

The above statement is detailed further in the Leasehold Reform (Ground Rent) Bill

The purpose of the Bill is to:

Tackle the inconsistency and ambiguity of ground rents for future leaseholders. The Government is legislating to require that –for the first time –ground rents in residential long leases will have no financial demand. These will beset in law as a ‘peppercorn rent’ level(the legal term), meaning that nothing more than a literal peppercorn can be sought from leaseholders.

The main benefits of the Bill would be:

Ensuring leaseholders of new, long residential leases can not be charged financial ground rent for no tangible service, making leasehold a more transparent and fairer system for homeowners.

The main elements of the Bill are:

Restricting the charging of ground rents on new long residential leases.

Enforcing the charging of a prohibited ground rent by way of a civil penalty regime, including fines of up to £5,000 for freeholders that charge ground rent in contravention of the Bill.

Ensuring that there can be no financial demand for ground rent for all future qualifying leases so that future leaseholders do not face unfair terms or significant ground rent liabilities.

Having only selected exemptions including:

• Some parts of the community–led housing sector, so they can retain the right to levy ground rent to maintain their ability to further promote community activities.
• Certain financial products which depend on leases where rent replaces interest-bearing mortgage payments, such as those drawn on by the older population for a type of equity release and the growing Islamic finance sector.
• Business leases, to allow people who need to live in the same premises as their workplace to continue to do this and agree with their freeholder the most beneficial and appropriate terms.