A ban on landlords charging ground rent to leaseholders will come into force on 30 June, the government announced today.
The Department for Levelling Up, Housing and Communities says this annual rent – sometimes running to hundreds of pounds – will be abolished in England and Wales, because “these charges provide no clear service in return and can be set to escalate regularly, with a significant financial burden for leaseholders”.
It adds that the ban will lead to “more transparent homeownership for thousands of homebuyers”.
The department says: “Anyone preparing to sign a new lease on a home in the next two months should speak to their landlord to ensure their ground rent rate reflects the upcoming changes.”
Leasehold minister Lord Stephen Greenhalgh adds: “This is an important milestone in our work to fix the leasehold system and to level up home ownership.
“Abolishing these unreasonable costs will make the dream of home ownership a more affordable reality for the next generation of home buyers.
“I welcome the move from many landlords who have already set ground rent on their new leases to zero and I urge others to follow suit ahead of this becoming law.”
The department says the move is part of a package of measures that will be the biggest reforms to English property law for 40 years.
Last January, it announced that leaseholders will be given the right to extend their leases to 990 years at zero ground rent. The department added that it would launch an online calculator to help leaseholders find out how much it would cost to buy their freehold or extend their lease.
Also, last December the Competition Market Authority secured commitments from Taylor Wimpey to stop the housebuilder from doubling ground rents every 10 years.
The watchdog also secured commitments from Aviva, Persimmon, Countryside Properties, Taylor Wimpey and others to ensure that leaseholders in properties where these firms own the freehold will see ground rents returned to the rate it was when they first bought their home.
The CMA is continuing its investigation into Barratt Developments, Brigante Properties and the investment group Abacus Land and Adriatic Land.
Propertymark policy and campaigns manager Timothy Douglas says: “These unfair and restrictive charges levied on leasehold homeowners have in some cases been allowed to become a cash-cow and abolishing them has been a long time coming.
“Propertymark has been a strong campaigner on this issue and it was our investigation in 2018 that helped bring the scale of it to light for the first time, revealing the impact it was having on the housing market as leasehold homeowners struggled to improve or sell their properties as a result.
“These changes only legally restrict ground rents on new leases, so we hope they are a catalyst for further reform by the housebuilding sector itself and the UK Government that will release the estimated over one million existing homeowners who remain locked into these agreements.
“Agents should be ready to understand the implications and the material information they need to provide to consumers when these properties come on the market from 30 June onwards.”
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