Leasehold reform proposals - ground rents

Scott Fowler Solicitors

1st October 2019

Legal Briefing

Scott Fowler Solicitors

By Danielle Parles

Scott Fowler Solicitors

IT is estimated that there are over four million leasehold properties in England and Wales - around 20 per cent of the total housing stock. Approximately 60 per cent of all leasehold properties are privately owned, which makes around 2.5m of us leasehold property owners.

Given these figures, it is unsurprising that there has been much media interest in the recent government proposals to reform what it describes as 'unfair practices in the leasehold market'. One of these so-called unfair practices is the charging by landlords of relatively high, and often escalating, ground rents.

Ground rents are annual payments charged to the tenant, usually a flat owner, for the occupation of land and they date back to Roman times. Traditionally, they were nominal, often a peppercorn or even a white rose, but in recent years they have increased significantly and are now seen as a substantial source of income for landlords. The new levels of ground rent charged, coupled with the fact that leases invariably allow landlords to increase them over time, has led to concern, particularly among mortgage lenders, that the value of properties is adversely affected. This in turn has led to lenders refusing to lend and property owners finding themselves unable to sell.

Since July 2017, the government has issued various consultations, which have included questions on ground rents. The latest response, in June 2019, sets out how the government intends to introduce legislation limiting ground rents on new leases, save in very limited circumstances, to a peppercorn.

Whilst is seems unlikely that any such legislation will affect existing leases, at least one national housebuilder has already taken the proactive step of financing lease variations for original buyers of flats sold with ground rents doubling every 10 years. It remains to be seen whether or not others follow.

Our residential conveyancing team is highly trained on all aspects of leasehold properties and we are closely following all developments in this area.

For more information on this topic call Danielle Parles on 01604 683825.

Scott Fowler Solicitors