Ground Rents to be Capped at £250 a Year for Leaseholders

Ground rents paid by leaseholders in England and Wales are set to be capped at £250 a year, marking a significant step in UK government reforms aimed at improving home ownership conditions.

Key Points of the Reform

• The government plans to cap ground rents, the annual fees leaseholders pay to freeholders, at £250 per year.

• New proposals include banning the sale of new leasehold flats and giving homeowners more control over building management.

• The reforms aim to phase ground rents down to a peppercorn (effectively zero) after 40 years.

• Forfeiture rights, which allow leaseholders to lose their homes over small debts, will be abolished.

• The bill will facilitate easier conversion from leasehold to commonhold ownership, where occupants jointly own the land and building without an expiring lease.

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Background and Impact

Ground rents have long been a contentious issue, with many leases including clauses that cause rents to double or increase with inflation, making properties difficult to sell or mortgage. Around five million leasehold homes exist in England and Wales, and while new leases have mostly abolished ground rents since 2022, existing leaseholders still face these charges.

The reforms respond to widespread campaigner concerns about "unregulated and unaffordable ground rent charges" that have trapped many leaseholders financially.

What This Means for Leaseholders

• Leaseholders can expect relief from escalating ground rents that have made selling or mortgaging difficult.

• The abolition of forfeiture rights protects leaseholders from losing homes over small debts.

• Greater control over service charges and building management is anticipated.

• The reforms are expected to come into force by late 2028 after parliamentary scrutiny.

  
  

Conclusion

These reforms represent a major shift in leasehold law, aiming to end unfair financial burdens on leaseholders and modernize home ownership in England and Wales. While some concerns remain about the timeline and impact on investors, the changes offer hope for millions of leaseholders currently caught in difficult financial situations.

Hermione Homes will continue to monitor these developments and provide updates and advice to leaseholders navigating these changes.