1. In a new lease of a flat (other than the extension of a previous lease) the Landlord cannot charge any ground rent other than “a peppercorn” – i.e no monetary ground rent.  Unless for each of the past three years the Landlord has demanded payment of their peppercorn but this has not been paid, the Landlord cannot apply to court to forfeit the lease for non-payment of rent. This should resolve one of the major current concerns about residential lease clauses.
2. Most lease extensions operate in law as a surrender of the old lease and grant of a new lease. In these cases, ground rent can be reserved until the end of the old Lease term but not increased from the amounts payable under the old Lease. So, for example, if the old Lease had 100 years to run and the ground rent was £150 per annum, but you now want to extend the Lease by 90 years, your extended Lease will be for 190 years but the ground rent cannot be more than £150 per annum for the first 100 years and thereafter during the last 90 years will drop to a peppercorn.
3. Pre-existing leases which have not been extended or varied remain unaffected. If your current lease contains toxic ground rent clauses, the new Act does not resolve this issue. You would need to vary or extend your lease to address the problem.
4. Unless, by 29^th June, you have completed a lease extension with a monetary ground rent or exchanged contracts to complete such a lease extension later, then you have “missed the boat”. * The premium a Landlord will require for a lease extension at a peppercorn ground rent is likely to be higher than one where a monetary ground rent is payable.

5. Statutory rights under the Leasehold Reform, Housing and Urban Development Act 1993 remain unaffected. If you have owned your flat for at least two years, you can still claim a lease extension to make your lease 90 years longer at a peppercorn rent.

6. We anticipate that the premiums for lease extensions will increase, because they will now have to factor in loss of ground rent income. Conversely, Landlords may be more willing than previously to grant “informal” leases without requiring lessees to go through the statutory procedure under the 1993 Act, because they cannot hold out for a monetary ground rent.  This should result in savings of time and professional costs for flat owners.

*We were approached after 29^th June by one solicitor (who shall remain nameless) who asked whether we could complete and date the document 29^th June.  We explained that since he did not have a Tardis, we could not accede to his request.

For more information, please contact Andy Finkel at Andy.finkel@haroldbenjamin.com