Further to our update on the Government’s residential leasehold reforms, the Leasehold Reform (Ground Rent) Bill was introduced into the House of Lords on 12 May 2021. The bill seeks to fulfil one of the proposals set out in the Law Commission’s enfranchisement report and follows on from the Government’s press release made earlier this year, to tackle the inconsistency and ambiguity of ground rents for future residential leaseholders.
In particular, the key details of the bill include:
- restricting the charging of ground rents to zero on new long residential leases;
- prohibiting the charging of administrative charges in relation to ground rent;
- the restriction will have prospective (not retrospective effect) and will apply only to future long residential leases;
- certain types of leases will be exempt from the restriction, including business leases and some parts of the community-led housing sector;
- a breach of the restriction will be considered a civil offence with a financial penalty of between £500 to £5,000 enforceable by trading standard authorities; and
- leaseholders will be able to recover unlawfully charged ground rents through the First-Tier Tribunal.
The bill is the first of two pieces of legislation designed to implement leasehold reform, with the second piece of legislation on changing the enfranchisement procedure expected in the next 12 months. The Government is also keen to revive commonhold ownership and on the 13 May 2021 launched the Commonhold Council, an advisory panel of leasehold groups and industry experts to help inform the Government on the future of home ownership.
Residential developers and investors may want to consider the impact of the bill on their current and future schemes.
We will provide further updates as the bill makes its way through Parliament.
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For any other legal questions related to UK real estate, please get in touch with your usual Mayer Brown contact or one of the blog editors.