Leasehold Reform (Ground Rent) Act 2022 – a ban on new ground rents is on the way

The Leasehold Reform (Ground Rent) Act 2022 got Royal Assent in February. It has yet to be implemented, but could be before 8 August 2022.

For new leases of houses and flats – the permitted rent will be a peppercorn (ie zero) 

If a rent is charged, a landlord/ freeholder  will be liable to a fine of anywhere between £500 and £30,000. The local weights and measures authority (often the district council) is the enforcement authority. It can also make an application to the Tribunal for an order that any rents paid are repaid to the lessee. 

it will not apply retrospectively to existing leases or for leases granted under contracts which have been exchanged before the legislation comes into force. 

For renewals of existing leases (excluding ones granted under leasehold reform legislation which have to be a peppercorn), the rent will need to remain the same until the existing term of the old lease expires but no new rent can be charged from the first day of the extended term. It will then have to be a peppercorn. 

John Midgley, head of the enfranchisement team at Seddons, comments: ‘This is the first instalment of a package of reforms to the leasehold system which the government seeks to bring forward. For landlords and tenants seeking to extend a residential lease term without going through the formal process under leasehold enfranchisement legislation, the impact of this new law should be considered carefully’

Please note the above is only a summary of the position and not intended to be full legal advice. For further information please contact John – john.midgley@seddons.co.uk