Leasehold Reform (Ground Rent) Bill [HL]: Briefing for Lords Stages
This bill seeks to restrict ground rents on newly established long residential leases of houses and flats to the value of one peppercorn per year (a token of no financial value).
In January 2021, the Government stated its intention to legislate in the 2021–22 parliamentary session to set future ground rents to zero for new leases. This was in response to the findings of an inquiry by the Law Commission on leasehold enfranchisement, published in July 2020. The inquiry recommended several reforms, including setting ground rents at zero.
In the 2021 Queen’s Speech, the Government confirmed plans to introduce the Leasehold Reform (Ground Rent) Bill. It was introduced in the House of Lords on 12 May 2021.
According to the Ministry of Housing, Communities and Local Government, the bill aims to make leasehold ownership fairer and more affordable for leaseholders by ensuring that freeholders or landlords will no longer be able to make financial demands for ground rent. It seeks to do this by establishing that new, long residential leases are only permitted to charge a peppercorn rent (which has zero financial value).
In addition, the bill would prohibit the charging of administration charges relating to peppercorn rents. The bill would also establish a civil penalty regime for those who charge a prohibited rent. This would be enforced by local weights and measures authorities (trading standards) and may be enforced by a district council. The bill sets out that the maximum financial penalty for this punishment would be £5,000.
Property associations have generally welcomed the bill. However, they have called on the Government to extend its provisions to those who the bill as drafted would be exempt from it. Propertymark, an association which represents lettings and estate agents, has called on the Government to extend the provisions on ground rents to those who already own a leasehold property.
On 24 May 2021, the second reading of the Leasehold Reform (Ground Rent) Bill [HL] is scheduled to take place in the House of Lords. This briefing provides a background to the bill, including information on the current law surrounding leaseholds and ground rents, and sets out some immediate reaction to the bill.