Leasehold Ground Rent Reform

The Leasehold Reform (Ground Rent) Act 2022 is set to come into force on 30 June 2022.  The legislation represents a significant change to property law in England and Wales.

From 30 June 2022 a summary of the main changes are as follows:

  • If any ground rent is demanded as part of a regulated new residential long lease, it will be limited to a “peppercorn” rent
  • Ground rent can continue to be applied for existing leases but leaseholders entering into voluntary lease extensions, the extended portion of their lease will be reduced to a ground rent of a peppercorn
  • Landlords will be banned from charging administration fees for collecting a peppercorn rent
  • Landlords who breach the Act will face a civil penalty for non-compliance. Penalties will range from £500 to £30,000.

The above provisions are not set to apply to retirement properties until 1 April 2023.  There will be very selected exemptions, but these are tightly defined and include applicable community-led housing, certain financial products, and some business leases of commercial premises which include a dwelling. There will be regulations to follow and specific prescribed notices that will be required to be exchanged by the landlord and the tenant to qualify for the business exemption.

Statutory lease extension for both houses and flats are to remain unchanged.