From 30 June 2022, future homebuyers will be freed from ground rent as the government in England and Wales ban the rent on leases
Ground rent is a fixed annual fee that many leasehold homeowners have to pay to their property’s freeholder, essentially for the use of the land on which the property stands.
As has been widely reported in recent years, ground rents can be controversial in nature and expensive, often increasing in price each year. The government in England and Wales has now stepped in and will ban landlords from charging homeowners ground rent. This means any one purchasing a home on a new long lease from 30 June this year will no longer have this charge.
Which leases are covered by the ban on ground rents?
Once fully in force, the Act will apply to new leases:
- Of a single dwelling.
- Granted for a term of more than 21 years, disregarding any early termination provisions. Shorter leases may also be caught where they can be renewed perpetually.
- Granted for a premium.
- Not granted pursuant to a contract entered into before the prohibition comes fully into force.
Whilst this ban is set for new leases from the end of June, from 1 April 2023 it will also include Retirement Properties. We expect to receive more details on this in due course.
If you are purchasing a new lease home between now and the 30 June, please speak to your Solicitor to ensure the contracts reflects the upcoming changes.
For existing leaseholders, the new law also means that if you decide to extend your lease informally (as opposed to the formal statutory route), the freeholder who owns the lease will be not able to increase your ground rent for the remaining period of your lease term. From the moment the existing lease term expires and the new term takes effect, the ground rent will revert to zero.
Our team are on hand to answer any questions you might have regarding this new information or any other residential property query.
*This article is provided for general information purposes only and does not constitute legal or any other professional advice.