Ground rents for new leasehold properties set to be scrapped

Reforms outlined in the Queen’s Speech today will see the planning system transformed and an overhaul of the leasehold system for property owners.

Communities and developers, particularly smaller developers, should have a better idea about what is permitted and where under the new system.

The leasehold system will see a radical overhaul which will have ground rents for new properties set in law at a "peppercorn rent level" - meaning nothing more than a literal peppercorn can be sought from future leaseholders.

The Leasehold Reform (Ground Rent) Bill covering England and Wales will ensure leaseholders of new, long residential leases cannot be charged a financial ground rent for no tangible service.

Freeholders ignoring the new rules by charging ground rent could be fined up to £5,000.

In the past, some leaseholders have faced spiralling ground rent charges and have been unaware of the costs they were taking on when they bought the property.

The proposals were announced in the Queen's Speech today (PA)

There will be exemptions to the new rules in a few cases, including business leases, to allow people who need to live in the same premises as their workplace to continue to do this; and some parts of the community-led housing sector, so they can retain the right to levy ground rent to maintain their ability to further promote community activities.

Mark Hayward, chief policy adviser at Propertymark, which represents estate and letting agents, said: "The issue of escalating ground rent on leasehold homes has been a long-term scandal which has left many owners trapped and unable to sell their homes.

“Our Leasehold: A Life Sentence research conducted in 2018 found that 46 per cent of leasehold house owners were unaware of the escalating ground rent when they purchased their property.

“Over one million households in the UK are sold as leasehold, and this legislation will go a long way to help thousands of home-owners caught in a leasehold trap.

“However, while this is a step in the right direction, we encourage the government to extend this to those who already own a leasehold property as well as all retirement properties, to create a level playing field.”