The Leasehold Reform (Ground Rent) Act 2022 – What to expect
03 May 2022
As part of its program of Law Reform, the government recently passed the Leasehold Reform (Ground Rent) Act 2022 which comes into force on 30th June 2022. Some of its provisions relating to retirement leases will not come into force until 2023, but otherwise, the Act has the following significant effects:
- On all new residential leases granted from 30th of June 2022 onwards, it is unlawful to charge a ground rent higher than a peppercorn. Landlords will suffer financial penalties if they breach this provision.
- For existing leases, the ground rent provisions in those leases remain valid.
- For lease extensions, the ground rent during the remaining period of the old lease remains valid but cannot be increased. The ground rent for the new extended period can only be a peppercorn. By way of an example, suppose you are dealing with a 99 year lease which has 50 years unexpired and a fixed ground rent of £100.00 per annum, which you have agreed to extend to a new term of 125 years. Under the new Act, there will be 50 years during which a ground rent of £100.00 per annum can be reserved to the Landlord, but not increased from that level. The ground rent for the new extended 75 year period must be at a peppercorn.
You need to bear this in mind if you are dealing with a lease extension or grant of a lease and it looks like it is not going to complete by 30th of June.
This is the first piece of Statutory Reform in relation to the government implementing the recommendations of the Law Commission’s various reports on Leasehold Reform over the past few years. Further reforms are expected in relation to Commonhold, Lease Extensions, Enfranchisements and the Right to Manage, but no legislation regarding these topics has yet been introduced.
For more information, please contact Andy Finkel, Partner Residential Property on +44 20 8872 3066 or Andy.Finkel@haroldbenjamin.com