In her first article, Hannah Faith, Paralegal in Frettens’ expanding Leasehold Property Team, looks at the Leasehold Reform (Ground Rent) Bill that was published yesterday. She provides an overview of the bill, describing what it could mean for leaseholders.
What is the Leasehold Reform (Ground Rent) Bill?
Ground rent issues have come to the public’s attention over recent years with lenders becoming wary about increasing ground rents.
It is therefore welcome news that Parliament yesterday published the Leasehold Reform (Ground Rent) Bill which looks to pave the way for the start of proposed leasehold reforms.
What will the Leasehold Reform Bill do?
The Bill, which is currently going through the House of Lords, is set to introduce the Leasehold Reform (Ground Rent) Act 2021 which will prevent landlords from granting new leases that require the leaseholder to pay a ‘Prohibited Rent’ (essentially, any rent at all).
The effect of this is that new leases (including most lease extensions) being granted will only entitle the landlord to receive a peppercorn ground rent i.e. zero.
There are to be some exceptions where the Act will not apply but it will largely relate to long leases of flats granted for more than 21 years.
What changes is the Leasehold Reform Bill set to make to Ground Rent?
Whilst statutory lease extensions already force landlords to reduce ground rent to a peppercorn, once it comes into force, the Act will mean that new Deeds of Variation or lease extensions granted on an ‘informal’ (voluntary) basis will be subject to the Leasehold Reform (Ground Rent) Act 2021 and will prevent landlords from demanding a ground rent.
What does the Leasehold Reform Bill mean for landlords?
Landlords who fail to comply with the new legislation could face financial penalties. If a leaseholder inadvertently pays ground rent incorrectly demanded by a landlord, the leaseholder will be entitled to claim the rent back, with interest.
What does the Leasehold Reform Bill mean for Leaseholders?
Whilst there is a long way to go in terms of rectifying the difficulties many leaseholders face with their existing increasing ground rents, it is a hopeful offering which should protect purchasers of new leases as well as preventing landlord’s offering informal lease extensions which seek to introduce onerous ground rent terms.
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