Leasehold Reform – Change on the Horizon?
A practitioner’s view
As part of the Government’s levelling-up agenda, the Government introduced legislation in February 2022 that would bring an end to a freeholder being able to charge ground rent on a new ‘voluntary’ residential lease.
The appetite for the Government’s reform in this area emerged following the well-publicised scandal of leasehold houses being sold by developers with onerous and escalating ground rents. In essence, developers were taking two bites of the same cherry by firstly cashing in on the sale of a house and then granting it as a leasehold interest (rather than freehold), which enabled developers to receive significant income during the course of the lease term via the collection of ground rent.
Don’t fall foul of new legislation!
Following the introduction of The Leasehold Reform (Ground Rent) Act 2022 on 30 June 2022, the level of ground rent in any new residential lease that is entered into after that date, cannot be for more than ‘one peppercorn’ (a peppercorn is a metaphor for token rent). Any freeholder caught charging a ground rent of more than a peppercorn may face a fine of up to £30,000 – you have been warned!
What of existing leases?
Unfortunately, for the significant number of leaseholders across the country with spiralling ground rents in their existing leases, the Government has not to date declared its intention to introduce any fresh legislation. This is despite the eye-catching announcement of the (then) Housing Secretary Robert Jenrick on 7 January 2021 when he relayed his Government’s proposals to ‘make it easier and cheaper’ for leaseholders to buy their homes.
As the law currently stands, a leaseholder is able to extend their lease for a peppercorn ground rent, but only for an additional period of 90 years from when the term in the existing lease comes to an end. One of the Government’s proposals is to enable a leaseholder who applies for a lease extension under the statutory route, to extend their lease to a term of 990 years (also for a peppercorn ground rent). With a view to making the process fairer, simpler and less contentious, it was proposed that an online calculator would be introduced with prescribed rates.
What’s next for leaseholders and freeholders?
I anticipate that even if fresh legislation is introduced by the Government, it would have to navigate through a number of barriers in Parliament with the proposed radical reforms to the valuation mechanism likely to be challenged, inevitably leading to even further delay.
It therefore remains uncertain as to how soon any of this might become law and, if implemented, the nature of these reforms are anticipated to be at least 1-3 years away, which in turn may then be dependent on the outcome of the next election.
So, in other words, if you own a property affected by any of these issues, you will most likely still be required to act now as the mere ‘prospect’ of reform is not likely to be something that will resolve any existing issues, and certainly not any time soon!
Bishop & Sewell acts for leaseholder and freeholder clients from its offices in central London.
If you would like to discuss any of the issues raised in this article, please do not hesitate to contact Laurent Vaughan, Senior Associate, Bishop & Sewell Solicitors, on 0207 079 4193 or lvaughan@bishopandsewell.co.uk.
The award-winning Bishop & Sewell Landlord & Tenant team – industry experts on Leasehold Reform legislation, including enfranchisement, lease extensions and Right to Manage.
July 2022
Thank you for helping to make Jewish News the leading source of news and opinion for the UK Jewish community. Today we're asking for your invaluable help to continue putting our community first in everything we do.
For as little as £5 a month you can help sustain the vital work we do in celebrating and standing up for Jewish life in Britain.
Jewish News holds our community together and keeps us connected. Like a synagogue, it’s where people turn to feel part of something bigger. It also proudly shows the rest of Britain the vibrancy and rich culture of modern Jewish life.
You can make a quick and easy one-off or monthly contribution of £5, £10, £20 or any other sum you’re comfortable with.
100% of your donation will help us continue celebrating our community, in all its dynamic diversity...
Engaging
Being a community platform means so much more than producing a newspaper and website. One of our proudest roles is media partnering with our invaluable charities to amplify the outstanding work they do to help us all.
Celebrating
There’s no shortage of oys in the world but Jewish News takes every opportunity to celebrate the joys too, through projects like Night of Heroes, 40 Under 40 and other compelling countdowns that make the community kvell with pride.
Pioneering
In the first collaboration between media outlets from different faiths, Jewish News worked with British Muslim TV and Church Times to produce a list of young activists leading the way on interfaith understanding.
Campaigning
Royal Mail issued a stamp honouring Holocaust hero Sir Nicholas Winton after a Jewish News campaign attracted more than 100,000 backers. Jewish Newsalso produces special editions of the paper highlighting pressing issues including mental health and Holocaust remembrance.
Easy access
In an age when news is readily accessible, Jewish News provides high-quality content free online and offline, removing any financial barriers to connecting people.
Voice of our community to wider society
The Jewish News team regularly appears on TV, radio and on the pages of the national press to comment on stories about the Jewish community. Easy access to the paper on the streets of London also means Jewish News provides an invaluable window into the community for the country at large.
We hope you agree all this is worth preserving.
