It has been confirmed that the confirmed Leasehold Reform (Ground Rent) Act 2022 will come into force on 30 June 2022. Ground rents on long leases of flats have long caused a problem in the housing market and after the Act comes into force, developers will no longer be able to sell a flat on a long lease with a ground rent payable. If any ground rent is demanded as part of a new residential long lease, it cannot be for more than one 'peppercorn' per year meaning that future leaseholders will not be faced with financial demands for ground rent. The Act also bans freeholders from charging administration fees for collecting a peppercorn rent. If a freeholder charges a prohibited ground rent, the freeholder will be subject to a civil penalty regime which includes fines of up to £30,000.
However, ground rents will continue to be an issue for people purchasing flats and houses that have already been constructed as ground rents have not been abolished completely because the Act is not retrospective.
This means that there are many thousands of flats which are still affected by ground rent issues and anyone thinking of buying or selling a flat should take specialist advice. A property with a high ground rent or unacceptable mechanism for review could lead to it being unsaleable or impossible to use as security for a mortgage.
To discuss this or any other property related issue, contact us.