Changes brought by the Leasehold Reform (Ground Rent) Act 2022
If you are a leaseholder or if you are considering purchasing a leasehold property, keep reading.
The Leasehold Reform (Ground Rent) Act 2022 comes into force on 30th June 2022 and brings with it major changes to the rules governing ground rent and lease extensions. The Act is part of the government’s plan to make leasehold properties more affordable and fairer. In effect the Act will prevent the Freeholders from charging more than a ‘peppercorn’, also know as ‘zero’, ground rent on all new residential long leases granted after the Act comes into force. This new rule equally applies to lease extensions, effectively bringing the ground rent to a ‘peppercorn’ as it would with a new statutory lease. However, for lease extensions, the ground rent will be set at zero once the period for the new lease starts and will not have effect immediately as it would in the case of an all-new lease. Therefore, you will still be liable for the ground rent set in the old lease until the new period added to the lease by the extension commences.
The Act does not affect any short-term tenancies, business leases, community housing leases, home finance leases or any leases that are already in existence. Nevertheless, from 1 April 2023 the rules set in the Act will also apply to retirement properties.
Freeholders need to be careful when granting new leases and/or extensions as the Act brings with it strict penalties of up to £30,000 if Freeholders are still charging ground rent or any administration fees for collecting the ground rent after 30th June 2022. Developers need to be equally aware of the new rules if they intend to sell the properties as separate leaseholds and grant new leases as it is crucial to ensure they are compliant with the Act.
If you are looking to buy a new leasehold property or to extend your existing lease or you would simply like to know more about how the new rules affect you, please contact our Conveyancing Team. You can call us on 01206 577676 or send us an email at [email protected]