The Government are committed to promoting fairness and transparency in the residential leasehold sector, and giving homeowners a fairer deal.
Today we have published a consultation on capping existing ground rents. It cannot be right that leaseholders can be required to make payments that require no service or benefit in return, have no requirement to be reasonable, and can cause issues when people want to sell their properties.
Today’s publication builds on the success of the Leasehold Reform (Ground Rent) Act 2022, which put an end to ground rents for new, qualifying long residential leasehold properties in England and Wales as part of the most significant changes to property law in a generation.
There are nearly 5 million leasehold homes around the country and 86% of owner-occupier leaseholders report paying a ground rent. Historically, ground rents were typically small sums, even a peppercorn. But in this century, we have seen an increase in these rents, often rising at frequent intervals. This can blight people’s homes and lives, leaving them facing ever rising costs yet unable to sell the property easily due to these charges.
Service charges offer a way for freeholders to charge leaseholders for legitimate expenses. The measures we are bringing forward as part of our leasehold reforms will make them transparent to leaseholders and make it easier to challenge unfair or unreasonable charges.
We know that there are ways to manage buildings effectively without exploiting leaseholders—many free- holders are already effective, responsible building owners; others need help in adjusting their business models so that they are fit for the 21st century, and I want to hear views from all interested parties on how we can help them do that.
I understand that this is a complex area, with many different interests including leaseholders, freeholders and investors, and I want to hear those views through this consultation to inform our decision.
In this consultation, I outline five options to reform ground rent for people who already pay it. We must make sure that leaseholders are better protected from some of the egregious examples of poor practice we have seen in recent years. This Government believe that all leaseholders should be treated fairly and equally, with greater confidence about the costs of managing property. Where they pay money, they should receive something in return.
Through this consultation we want to understand better the challenges these options may present. This includes understanding any blockers to moving towards a fair and transparent model of charging for legitimate expenses through the service charge, and how we can address them.
Subject to this consultation, we will look to introduce a cap through the leasehold and freehold reform Bill.
[HCWS22]