The Government has announced that the Leasehold Reform (Ground Rent) Act 2022 will come into force on 30 June 2022. The legislation will prevent landlords from recovering ground rents in respect of residential leases which are granted on or after 30 June 2022 for a premium.
The requirement for a premium does not relate to new leases which extend the length or the property demised by an existing lease.
Certain types of leases such as business leases, statutory lease extensions of houses and flats, community housing leases and home finance plan leases are exempted from the legislation. Leases of retirement flats will be subject to the new regime from 1 April 2023.
The new legislation will not have retrospective effect but it will apply to existing leases in the following ways:
- If a lease is subject to a deemed surrender and re-grant e.g. following a variation to the extent of the demise, the landlord will be able to recover ground rent for the remainder of the term of the surrendered lease but only a notional peppercorn rent will be payable during the term of the new lease
- If a tenant completes a voluntary lease extension, the landlord will, similarly, be able to recover ground rent for the remainder of the term of the existing lease and a peppercorn under the new lease.
The legislation is aimed to deal with the problem of excessive ground rents being charged and if a landlord has recovered unauthorised ground rent which is not reimbursed to the tenant within 28 days then it will be liable to pay a fine of up to £30,000.
The new legislation should prevent purchasers of leasehold properties being subject to unfair or unreasonable ground rents but it does not address the problems faced by existing tenants who are already paying excessive ground rents and face difficulties selling their properties as a result.
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