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The Leasehold Reform (Ground Rent) Act 2022

We assist lots of clients who have either purchased new property with onerous ground rents or who have undertaken a voluntary lease extension and agreed an onerous ground rent as part of the terms. These ground rents are typically high and have review clauses which operate regularly. This leads to the ground rent increasing to very high levels. This legislation should stop this practice happening.

The Leasehold Reform (Ground Rent) Act 2022 is the first part of the Government’s proposed legislative changes in respect of residential leasehold properties. The Bill has received Royal Assent and it will come into effect on 30th June 2022 (except for retirement flats where the provisions will not come into force until at least 1st April 2023).

The Act will limit the ground rent payable under a new lease to a peppercorn (zero) per annum. There are different rules in place in respect of Replacement Leases (a voluntary lease extension is a replacement lease). In these circumstances the ground rent is allowed to continue providing it falls away to a peppercorn (i.e. zero) for any additional extended lease term.

If you have currently negotiated a voluntary lease extension with a larger ground rent than the current ground rent, you will need to make sure this is completed by the 30th June 2022 or it will be illegal.

Julian Wilkins & Co Chartered Surveyors are able to advise upon any ground rent issues including deeds of variations to agree lower ground rents where the current ground rent is considered onerous and affects the saleability and mortgageability of flats.

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