Landlords Beware: Leasehold Reform (Ground Rent) Act 2022
The Leasehold Reform (Ground Rent) Act 2022 (the Act) came into force on 30th June 2022, paving the way for new leasehold properties, with the exception of retirement home properties where it shall not come into force before 1 April 2023.
The Act asserts that ground rent for new, qualifying long residential leasehold properties in England and Wales will cease, subject to certain exceptions.
Landlords can only charge a nominal rent known as a “peppercorn rent” which means that no money can be legally charged for ground rent on leases regulated by the Act, subject to certain exceptions. The Act also prohibits landlords from collecting administration fees for the collection of the “peppercorn rent”, highlighting the robust stance the government is now taking.
The following could be categorised as a “regulated lease”:-
- a long lease of a single dwelling;
- the lease is granted for a premium;
- the lease is granted on or after the relevant commencement day, otherwise than in pursuance of a contract made before that day;
- when the lease is granted, it is not an excepted lease.
The following could be categorised as an “excepted lease”:-
- certain business leases;
- statutory lease extensions;
- a community housing lease;
- a home finance plan lease.
Ancillary guidance:
If the Act is contravened, you can expect punitive measures to be imposed upon you in the form of fines anywhere between £500.00 to £30,000.00, if satisfied beyond reasonable doubt the Act has been contravened.
When managing your property portfolio, it would be wise to ensure that you do not vary a lease so that it amounts to a surrender and regrant of a lease. A new lease could fall within the provisions of the Act which is where a “peppercorn rent” could be only permissible. Careful consideration must be taken when extending a lessee’s lease.
It is particularly pertinent that statutory lease extensions under the Leasehold Reform Act 1967 (LRA 1967) and Leasehold Reform, Housing and Urban Development Act 1993 (LRHUDA 1993) are excluded from the restrictions in this Act. The primary reasoning for this is as follows:-
- Statutory lease extensions for flats under the LRHUDA 1993 are already required to be at a peppercorn rent, such extensions could be made for the balance of the term, plus 90 years
- Statutory lease extensions for houses under the LRA 1967 are required to be for an additional 50 years for payment of no premium, but for a modern ground rent. One could argue that restricting the rent to a peppercorn could deprive the landlord of income for the granting of the lease extension; It is understood that the government intends to address the wider issue of enfranchisement and statutory lease extensions in future legislation.
Many of the notions in this article demonstrates a significant change in property law, which now facilitates a better and fairer deal for tenants in the often ever-increasing ground rent rates.
If you have any questions regarding anything covered in this article, please call us on 02476 231000 or email enquiries@askewslegal.co. Please note that this article is for information purposes only and does not constitute legal advice.
