Escalating ground rents should no longer be a problem when selling your leasehold home
Ground rents are charged to leaseholders by freeholders who own the land on which their home is built or the building in which flats are contained. Ground rents and service charges have been allowed to escalate, sometimes to thousands of pounds a year.
A year or so ago campaigners hailed a breakthrough in the leasehold scandal that should help thousands of prospective homeowners. Barratt Developments was first to offer 999-year leases and zero ground rent on new-build flats. Other developers have since followed suit.
The changes were introduced ahead of an update to the government’s Help to Buy subsidy scheme for first-time buyers. When ministers announced that developers would no longer be able to charge ground rent on properties sold under the scheme.
The Competition and Markets Authority's (CMA) intervention freed thousands of leaseholders from increasing ground rent terms that saw them trapped in homes they struggled to sell or mortgage.
Due to the CMA’s intervention, thousands of leaseholders will now see their ground rents remain at the original amount – i.e. when the property was first sold – and they will not increase over time.
The Leasehold Reform (Ground Rent) Act 2022 comes into force on 30 June 2022.
It puts an end to ground rents for new, qualifying long residential leasehold properties in England and Wales. This is part of the most significant changes to property law in a generation.
After the Act comes into force, ground rent in most new leases cannot legally be for anything more than “one peppercorn per year”. This “peppercorn rent” means that no money can be legally charged or paid as ground rent on leases regulated by this Act.
The Act bans freeholders from charging administration fees for collecting a peppercorn rent.
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