Leasehold Reform (Ground Rent): Update July 2022

4th July 2022

The Leasehold Reform (Ground Rent) Act 2022 (‘the Ground Rent Act‘) received Royal Assent on 8 February 2022. Please see our earlier briefing.

More recently, on 21 June 2022, the Leasehold Reform (Ground Rent) Act 2022 (Commencement) Regulations 2022 (SI 2022/694) (‘the Commencement Regulations’) were made.

The Commencement Regulations provide that the substantive provisions of the Ground Rent Act came into force, for most new long residential leases, on 30 June 2022 (and not before 1 April 2023 in relation to retirement homes leases).

What does this mean?

This means that, from 30 June 2022, there is a restriction on the level of ground rent that a landlord of an individual dwelling can lawfully charge its tenant, under most new long residential leases, to one peppercorn.

Which leases does this apply to?

Subject to certain exceptions, the ground rent restrictions apply to long leases of single dwellings granted for a premium on or after 30 June 2022. These leases are referred to in the Ground Rent Act as “regulated leases”.

Special rules apply to leases which replace leases granted before the 30 June 2022, leases arising by deemed surrender and regrant where there is a variation, and also shared ownership leases. In addition, some types of lease are excepted from the ground rent restrictions (business leases, statutory lease extensions of houses and flats, community housing leases and home finance plan leases).

The Ground Rent Act also prohibits payment of administration charges in relation to peppercorn rents.

Enforcement

Trading standards authorities can enforce the rent restriction provisions in the Ground Rent Act. They have power to impose financial penalties for breaches by landlords and former landlords, which can range between £500 and £30,000 per lease.

Trading standards authorities can also order repayment of overpaid rent by past and current landlords. In addition, tenants can apply to the First-tier Tribunal (Property Chamber) for an order against their landlords to recover unlawfully charged ground rents.

Government guidance

The government has published guidance on the Ground Rent Act. This can be accessed here:

The Leasehold Reform (Ground Rent) Act: Statutory guidance – GOV.UK (www.gov.uk)

The Leasehold Reform (Ground Rent) Act: User guidance – GOV.UK (www.gov.uk)

In addition, the government has updated its ‘how to’ lease guide, which is a guide aimed at anyone living in a leasehold property, or anyone who is thinking of buying a leasehold property. This updated guide can be accessed here:

How to lease – GOV.UK (www.gov.uk)

The future

The bringing into force of the substantive provisions of the Ground Rent Act, on 30 June, is a milestone for the government, as it continues to make changes to the law in the residential leasehold sector. Further leasehold reform is anticipated.

How we can help

Pawan Pandit is a senior associate in Walker Morris’ Housing Management & Litigation Team, and specialises in long residential leasehold and property management. Pawan is experienced in advising on enfranchisement, residential service charge issues, forfeiture and recovery of possession of residential property, and all aspects of residential block and portfolio management.  For further information, advice or training in relation to the Ground Rent Act, leasehold reform or block management generally, please contact Pawan, who will be very happy to help.