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Leasehold Reform (Ground Rent) Act 2022

Posted on April 7th 2022

What is the new law looking to change?

The Leasehold Reform (Ground Rent) Act looks to restrict ground rent on new long leases to ‘one peppercorn’, i.e. there is no ground rent payable. This new legislation will not affect existing leases. The new law affects long residential leases of residential properties for a term over 21 years. It does not relate to assured shorthold tenancies. The Act is not yet in force but it is anticipated that it will be shortly.

The reasoning behind the Act is that in England and Wales, it is common for long leases to require the tenant to pay ground rent to the landlord. In recent years, some long leases have been sold with very high ground rents with shorter review periods which can quickly become very expensive. These increasing ground rents can make it very difficult for the leasehold owners to sell or re-mortgage their property because many UK lenders are reluctant to lend where the leases contain unreasonable high levels of ground rent.

How does this affect me? 

The new law has the aim to make owning a leasehold fairer and more affordable by reducing the ground rent on long residential leases to one peppercorn per year, essentially meaning rent is no longer payable. If the new ground rent law is not implemented in new leases, leaseholders can recover unlawfully charged ground rents and there will be a financial penalty between £500 and £30,000.

The new law is only applicable on new leases and will not assist existing leaseholders facing high and escalating ground rents.

What can I do next? 

Here at Oliver & Co, we can assist in drafting new leases to ensure they are compliant with the law when it comes into force.

Our Commercial Property Department can also assist in helping varying your existing lease to enter into a less onerous ground rent clause to prevent high and escalating ground rents.

Please get in touch today for a quote on 01244 312306.

Call and speak to a lawyer on 01244 312306