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Government bans ground rent charges on new residential leases

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Ground rent charges will be banned on most new residential leases in England and Wales from 30th June, the government has confirmed. Sometimes worth hundreds of pounds a year, the government says these charges "provide no clear service in return and can be set to escalate regularly, with a significant financial burden for leaseholders". From 30th June 2022, landlords will be banned from charging ground rent to future leaseholders.

In preparation, many landlords have already reduced ground rent to zero for homebuyers starting a new lease with them. The government says anyone preparing to sign a new lease on a home in the next two months should speak to their landlord to ensure their ground rent rate reflects the upcoming changes. The move forms the first part of the a government reform package which aims to make homeownership cheaper, fairer and more secure.

Future measures, announced last year, include a new right for leaseholders to extend their leases to 990 years at zero ground rent and an online calculator to help leaseholders find out how much it would cost to buy their freehold or extend their lease.

In addition, thousands of existing leaseholders have already seen a reduction in their inflated ground rent costs. In a government crack-down, the Competition Market Authority (CMA) secured commitments with major homebuilders to stop doubling ground charges every year for leaseholders. Those who own properties with Aviva, Persimmon, Countryside Properties, Taylor Wimpey and others will see their ground rent returned to the rate it was when they first bought their home. The CMA’s investigation is continuing into Barratt Developments, Brigante Properties and the investment group Abacus Land and Adriatic Land.

The ban on landlords charging ground rent on new residential leases will also apply to retirement homes. This will come into force no earlier than 1st April 2023 and more details will be confirmed in due course.

Leasehold Minister, Lord Stephen Greenhalgh said: “This is an important milestone in our work to fix the leasehold system and to level up home ownership. “Abolishing these unreasonable costs will make the dream of home ownership a more affordable reality for the next generation of home buyers. “I welcome the move from many landlords who have already set ground rent on their new leases to zero and I urge others to follow suit ahead of this becoming law.”

Posted by MMB Finance Swindon on 22 April 2022