Ground rent for new residential leases set to be outlawed

The unpopular practice of charging ground rent for residential leases looks set to end for some, with the announcement that ground rents will be banned on most new residential leases in England and Wales from June 30.

This controversial practice, of charging often extortionate levels of ground rent to the owners of leasehold properties, has hit the headlines over the last few years.

The announcement is very good news for house-buyers, who might otherwise be facing costly ground rents if they move into newbuild, leased homes.

Sometimes costing householders hundreds of pounds a year, the Government says these charges “provide no clear service in return and can be set to escalate regularly, with a significant financial burden for leaseholders”.

From June 30, 2022, landlords will be banned from charging ground rent to future leaseholders.

Anticipating this move, some landlords have already reduced ground rent to zero for homebuyers starting a new lease with them.

Anyone about to sign a new lease in the next few weeks, before the new rules come into force on June 30, is advised to consult their conveyancing lawyer, or the landlord, to ensure any ground rent reflects the new changes.

The move forms the first part a Government package which aims to make homeownership fairer and more secure.

Future measures, which have already been announced, include a new right for leaseholders to extend their leases to 990 years at zero ground rent, with an online calculator to be introduced to help leaseholders find out how much it would cost to buy their freehold or extend their lease.

Meanwhile, thousands of existing leaseholders have already seen a reduction in their ground rent costs, thanks to the Competition Market Authority (CMA), which secured commitments with some major homebuilders to stop doubling ground charges every year for leaseholders. Anyone with a property with developers including Persimmon, Countryside Properties and Taylor Wimpey will have their ground rent returned to the rate it was when they first bought their home.

The ban on landlords charging ground rent on new residential leases will also apply to retirement homes, but this will not come into force until April 1, 2023.

For help and advice on buying or selling any property, including newbuild leasehold homes, please get in touch with the conveyancing team at Optimum. Email Tara Screen, [email protected], or Karen Gleed, [email protected].