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Flagship First Homes scheme launches

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Leasehold Reform Bill published

Thursday 13 May 2021

The Leasehold Reform (Ground Rent) Bill has been published today, 13 May, and when implemented aims to help tackle inconsistency and ambiguity of ground rents for future leaseholders.

The UK Government is introducing the Bill so that ground rents in new residential long leases in England will have no financial demand for all future qualifying leases and that leaseholders do not face unfair terms or significant ground rent liabilities.

The first reading took place on 12 May which started the Bill's journey through the House of Lords. However, no further scheduled dates are in place for future readings to finalise the legislation.

Leasehold campaigning

Propertymark has campaigned for years for changes to the leasehold system to resolve the issue of escalating ground rent. We have responded to multiple consultations and in 2018 our research Leasehold: A Life Sentence found that 46 per cent of leasehold house owners were unaware of the escalating ground rent when they purchased their property.

Over one million households in the UK are sold as leasehold, and this legislation will go a long way to help thousands of homeowners caught in a leasehold trap. However, Propertymark will continue to encourage the Government to extend this to those who already own a leasehold property as well as all retirement properties, to create a level playing field.

The Law

Once the Bill is passed into law, a ‘peppercorn rent’ level, which is the legal term, will come into place. This means that nothing more than a literal peppercorn can be sought from leaseholders.

Another main element is enforcing the charging of prohibited ground rent by way of a civil penalty regime, including fines of up to £5,000 for freeholders that charge ground rent in contravention of the Bill.

Exemptions

Some parts of the community-led housing sector will be exempt so they can retain the right to levy ground rent to maintain their ability to further promote community activities. 

Certain financial products which depend on leases where rent replaces interest-bearing mortgage repayments are also exempt, such as those drawn on by the older population for a type of equity release. 

Another selected exemption is business leases – to allow people who need to live in the same premises as their work to continue to do this and agree with their freeholder the most beneficial and appropriate terms. 

PROPERTYMARK RESOURCES

An FAQ document for members on leasehold reform is available to download from the member area.