Ground rent caps missing from Leasehold reforms

Reforms to leasehold and freehold in England and Wales have finally become law, but the promised cap on ground rents is missing.

The Leasehold and Freehold Reform Bill, which was first proposed in November 2023, has been granted Royal Assent. It is claimed that the Bill will make it cheaper and easier for people to buy their freehold, increase standard lease extension terms to 990 yeas for houses and flats and provider transparency over service charges.

key, home, house

However, plans to remove ground rent for existing leaseholders or cap it at £250 have been axed from the legislation. The decision to remove this rule was made last minute on Friday and Michael Gove had originally planned to cap ground rents at nominal level.

A ground rent is paid by owners of leasehold properties on top of their mortgage, with some facing high charges and unexpected increases which can make properties hard to sell.

Following the enactment of the Leasehold and Freehold Reform Bill, Mark Chick, director of the Association of Leasehold Enfranchisement Practitioners, said: ‘In what are some of the biggest changes to the residential leasehold sector in the last 21 years since the Commonhold and Leasehold Reform Act 2002 came into force in 2003, we now have a major shift in the direction of the law as it relates to residential long leasehold enfranchisement (the right to buy your freehold or extend your lease), with the passing of the Leasehold and Freehold Reform Act 2024.

‘ALEP has long been at the forefront of campaigning for change in the residential leasehold sector and right back from its beginnings just over 16 years ago, ALEP has continuously sought to engage with government over legislative change.

‘Whilst the provisions of the Leasehold and Freehold Reform Act 2024 go some way to addressing a number of the issues that we and our members have mentioned for years (such as the two year qualification period and the position relating to successive claims), this is in some senses a ‘piecemeal’ piece of legislation, making radical changes to the valuation regime, to the detriment of freeholders and the advantage of leaseholders.’

‘Our members welcome the general prospect of reform but, what we have with the LHFRA and the way in which it has been passed at the end of this parliament is is a hurried set of changes,’ Mark added. ‘Several of our members have worked with government to ensure that the legislation is workable, and we have been in dialogue with DLUHC throughout. Whatever the individual views of our members (and we represent a range of viewpoints) as an Association, we simply wish to see a workable system brought in.’

The Bill being passed into law was one of the last pieces of legislation to make it through Parliament on Friday before it was shut down ahead of the next General Election, which is due to take place on 4th July 2024.

Robert Poole, director of Glide, part of the Leaders Romans Group, said: ‘For years, the leasehold system has been a topic of contention, leaving homeowners and managers of blocks of flats grappling with uncertainties.

‘The Leasehold and Freehold Reform Act aims to introduce measures to increase leaseholders’ rights, provide them with more control over their properties, and make lease extensions more affordable. It heralds a landmark shift in the leasehold system and a future in which homeowners are granted greater autonomy over their homes, with reduced costs and red tape.’

Robert added: ‘So it is good news that the Leasehold and Freehold Reform Act has passed into legislation imminently despite many other Bills falling victim of the general election’s timing.’

Image: mastersenaiper

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