In November 2021 the Leasehold Reform (Ground Rent) Bill had its second unopposed hearing in the House of Commons and was sent to a Public Bill Committee for further scrutiny. The aim of the Bill is to address the rising ground rents that have been seen in recent years and tackle the ambiguity and inconsistency of ground rents for future residential leaseholders.  We first set out the proposals in our Legal Updates of July 2019 and August 2020 which can be found here and here.

The Bill is part of a package of leasehold reforms which the Government intends to implement and is the first of two pieces of legislation designed to enact these reforms. The second piece of legislation will focus on changing the statutory process for enfranchisement and making the lease extension procedure easier and more affordable.

The Bill applies to properties in England and Wales and is intended to make provision about the ground rent payable under new long lease dwellings (which could be a single house or a flat). Once passed, it will not be retrospective, applying only to future long residential leases. The Bill will not apply to business leases and some parts of the community-led housing sector.

Key Details

The Bill will:

• Restrict ground rents to zero on new long residential leases;

• Prohibit charging of administrative fees in relation to ground rent;

• Punish breaches by making it a civil offence with a financial penalty of not more than £30,000 per qualifying lease, which would be enforced by local authorities and trading standards; and

• Allow lessees to recover any unlawfully demanded ground rent, together with interest, through the First-Tier Tribunal.

Timings

The Committee is scheduled to be sitting this week (7 December 2021). The Bill will be subject to a detailed examination with amendments for discussion selected by the Chairman of the Committee on which members can vote. The Report stage is due to take place on 9 December 2021.

A commitment has been made for the provisions of the Bill to come into force within 6 months of receiving royal assent and becoming law.

So what should we do now to prepare for the Bill becoming law?

Some landlords have already begun to grant new leases at a peppercorn rent. Landlords should familiarise themselves with the details of the Bill now to ensure they are ready to comply when granting new leases after the Act comes into force.

Because the Act will only apply to new leases it will have no effect on leases already in existence. That is despite the fact that we are already (and have been now for over a year) hearing from leaseholders, who invariably have not paid rent and/or service charges, who most confidently, but wholly incorrectly, inform us that demanding ground rent (and some even say service charges!) is “illegal” etc. etc.  So it might be wise to have prepared a fact sheet on the Act ready for the in force date to assist you in explaining why their rent and service charges are in fact still required and payable.

If you have any queries whatsoever, please get in touch with a member of the team on 01435 897297 or info@kdllaw.com.

Disclaimer

This legal update is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of KDL Law or by KDL Law as a whole.

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