Leasehold Reform (Ground Rent) Act 2022

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Lease Law
by Elizabeth Elliott

The highly anticipated Leasehold Reform (Ground Rent) Act 2022 received Royal Assent on 8th February 2022 and Lord Greenhalgh, Minister of State for Building Safety and Fire recently confirmed that the government plans to commence the provisions of the Act on 30 June 2022 which will lead to a ‘fairer, more transparent homeownership for future generations’.

Qualifying Leases

  • The Act will apply to residential long leases granted for a premium, for a term of 21 years or more and entered into from and including 30 June 2022.
  • The Act does however exclude some leases including business leases, statutory lease extensions of houses and flats, community housing leases and home finance plan leases.
  • The provisions will not apply to retirement properties until 1 April 2023.

Peppercorn Rent

  • The maximum ground rent that can be demanded in a new residential long lease cannot be more than one literal peppercorn per year. In practice, most future residential leaseholders will not be faced with financial demands for ground rent.
  • Landlords will be prohibited from charging administration fees for collecting a peppercorn rent.
  • For existing leaseholders entering into voluntary lease extensions after 30 June 2022, the extended portion of their lease will be reduced to a peppercorn.

Sanctions for non-compliance of Landlords

  • Landlords who do not comply with the provisions of the Act will face civil penalties of between £500 and £30,000.
  • Additionally, a leaseholder under a qualifying lease will have the right to make an application to the First-Tier Tribunal (Property Chamber) in England for a declaration that a term reserving a prohibited ground rent is replaced with a peppercorn rent.

We welcome the commencement of the Act and look forward to being a part of the evolution of the leasehold regime.