Changes to Leasehold Ground Rents – what does this mean for Leaseholders?

• Posted onAugust 10, 2022

The Leasehold Reform (Ground Rent) Act 2022 came into force on 30 June 2022 and represents the first stage of the Government’s plan to make leasehold properties more affordable with fairer lease terms.

What has changed in leasehold ground rents?

Many existing leases contain expensive ground rent clauses which often cause problems for owners of leasehold properties. The problems can include lenders refusing to lend if they consider ground rent provisions to be unaffordable for a buyer or a seller being unable to sell their home.

Some leases contain clauses meaning the ground rent payments increase exponentially, which potentially can mean annual ground rent payments in the hundreds of thousands or millions towards the end of the term of a lease.

The good news is that the changes brought in by the Act mean that anyone buying a new leasehold property (i.e. not a property with an existing lease) after 30 June 2022 will not be charged ground rent.

Which leases will the changes apply to?

The changes made by the Act apply to all new residential long leases (leases with a term of more than 21 years) of properties in England and Wales. It does not apply to short term tenancies.

Some types of leases are excluded by the Act which includes business leases, statutory lease extensions, community housing leases and home finance leases.

Retirement properties are also currently excluded until 1 April 2023.

Will the change apply to my lease?

If you already own a leasehold property with an existing lease dated before 30 June 2022, the changes will not apply to your property.

Further reform is clearly needed and the Government will hopefully be addressing the issue of paying ground rent under existing leases in the future.

The above is for general information only. Whether you are a buyer, freehold owner or developer of a leasehold property, you should seek legal advice before entering into a new lease.

For information on how we can help you buy your new leasehold property you can get in touch today here or by using the form on this page. Alternatively, you can call us on 01453 847200.