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Ground Rents and Reversion Sales

Dec 21, 2017
The government has announced its intention to reduce ground rents for new dwellings to zero in the future.

It will not be retrospective but it may well be imposed after contracts have been exchanged for the sales of reversions but before marketing of the individual units has commenced. Some contracts for the sales of reversions have a right for the buyer to determine the contract if the income falls below a particular level. Notwithstanding this, purchasers of reversions may argue that any existing reversion contracts are frustrated and need no longer be performed. 

On sites where there is no right to determine sellers would, no doubt, argue the contracts are not frustrated and purchasers have to complete the purchase, even if it is for no value, as sellers would not want to be long-term owners of reversions with ongoing obligations re management, insurance etc.

Going forward, the market for reversions will effectively be killed and this, in reality, may force the residential flat market down the commonhold route so sellers do not end up as long-term owners of reversions.

Michael Talbot

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Michael Talbot

The Commercial Property team is led by Michael Talbot. Michael qualified as a solicitor in 1982, having graduated from Nottingham Trent University and Lancaster Gate ...

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