Ground rent charges are to be banned on new-builds in a bid to protect millions of leaseholders from eye-watering increases every single year.
Under a new law confirmed in Tuesday's Queen’s Speech, people in residential long leases will pay no ground rent, other than a fixed ‘peppercorn’ amount which would protect homeowners from escalating fees.
The Leasehold Reform Bill will ban ground rent for flat owners - making them pay just a peppercorn each year, in England and Wales. However it will only apply to new buyers of new-builds - meaning 4.5million leaseholders in England and Wales will still be liable for the costs.
"My Government will help more people to own their own home whilst enhancing the rights of those who rent," Her Majesty the Queen said in her first public statement since the death of Prince Philip.
"Laws to modernise the planning system, so that more homes can be built, will be brought forward, along with measures to end the practice of ground rents for new leasehold properties.
"My ministers will establish in law a new building safety regulator to ensure that the tragedies of the past are never repeated."
Currently, millions of householders in England own their homes on a leasehold basis and pay an annual ground rent to the freeholder of the property.
Typically, this ground rent is set at a low “peppercorn” rate, however some developments of leasehold homes - namely new-builds - contain clauses in their leases which allow rents to rise at regular intervals by huge amounts.
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Furthermore, freeholders can increase ground rents whilst failing to offer any benefit to leaseholders.
These loopholes mean millions of people are being forced to pay eye-watering ground rents and costs for extending their lease, sometimes leaving them unable to sell their homes.
However the new law will ban ground rent from rising above the peppercorn amount.
Efforts to tackle the problem were first launched by the government in 2017.
At the time, then Communities Secretary Sajid Javid said that home buyers were being exploited with "unfair agreements and spiralling ground rents".
At the start of this year, Housing Secretary Robert Jenrick promised that ground rents would be scrapped for millions.
Under new proposals not included in the speech, millions of leaseholders in England could also be given the right to extend their lease by up to 990 years at zero ground rent, in a government bid to make leasehold home ownership “fairer and more secure”.
Currently, leaseholders of houses can only extend their lease once for 50 years and pay a ground rent, and flat owners are able to extend their lease multiple times with a peppercorn rent for 90 years.
Under the reforms, both leaseholders and flat owners would be able to extend their lease up to 990 years with zero ground rent, and all new retirement properties will be sold without a ground rent.
Additionally at present, extending a lease currently comes at a cost, however under the reforms, the government has advised that it would alter the way that these costs are calculated, including the removal of costs such as the “marriage value”, which allows the freeholder to share any potential profit from an extension with the leaseholder.
The Queen's Speech marks the official opening of Parliament and sets out the government's agenda for the next 12 months.
The measures would allow renters to transfer deposits directly between landlords instead of having to pay up for their next property while waiting for a refund on the last landlord.
Ministers are considering the scheme, known as deposit “passporting” to make the system simpler for renters.
The planned scheme is designed to ease the pressure on millions of renters who typically need up to five weeks rent to fund a deposit for a new rental home while having money tied up with an existing landlord.
According to the Deposit Protection Service, the average rental deposit is £1,040 in England and Wales, while tenants in London face paying around £1,750 when moving property.
Passporting would allow a direct transfer of funds from the previous landlord to the new one on the day of the move.
