The Leasehold Reform (Ground Rent) Act 2022 is welcome news for leaseholders and those purchasing leasehold properties.

The Act came into force on the 30th June 2022 and provides for a regulated Lease meeting the following general criteria i.e. it is a long lease of a single dwelling and granted for a premium. Further information can be found via the following link:

https://www.legislation.gov.uk/ukpga/2022/1/section/1/enacted.

There are some exceptions to this, for example, a lease of premises used for business purposes and further detail can be found via the following link:

https://www.legislation.gov.uk/ukpga/2022/1/section/2/enacted.

The main issues covered by the Act are as follows:-

  • All new regulated leases will be granted at a peppercorn rent
  • Landlords cannot charge administration fees for collecting peppercorn rents
  • Financial penalties will be imposed against Landlords who seek to include a payment of ground rent (other than a peppercorn).
  • Voluntary lease extensions of existing leases – the rent on the extended term of the lease must be a peppercorn.

There are problems arising from the Housing Act 1988 in relation to the level of ground rent payable under the terms of a lease and escalating ground rent review provisions.   This Act came into force in January 1989.  The issue surrounds the purchase of a leasehold property where the ground rent is, or will, during the term of the lease exceed £250.00 (£1,000.00 in London), meaning that the lease will therefore fall within the provisions of the 1988 Act and become an assured tenancy.

The problem arises, in part, out of the wording of Schedule 2 of the Housing Act 1988, which determines that if payments are missed in a given period, the Court must, without discretion, terminate those leases and award possession of the property to the freeholder. There are indemnity insurance policies available on the market but these are designed on the basis of lender protection only and thus offer no protection to the leaseholder.

If you need advice on your property requirements, or would like to discuss the above, please call our Maghull branch on – 0151 526 7131 – to speak with a member of our Property Team.