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Government Poised to Abolish Ground Rents in Radical Leasehold Reforms

Jul 03, 2019
The Communities Secretary speaking at the Chartered Institute of Housing Conference confirmed the government’s intention to press forward and legislate for the abolition of ground rents in residential leases. Currently tenants in typical new build apartments will pay around £300 -£400 per annum in ground rent to their landlord. 

The Right Honourable James Brokenshire MP outlined the government’s plans that will not only include reducing all ground rents on new leasehold apartments to £0, but also to make it illegal for house builders to sell houses on a leasehold basis which has been widely criticised as unfair practice.

Those who find themselves living in leasehold houses will also be given the opportunity to acquire the freehold at no additional cost to themselves.  The only exception to this will be where for legal and practical reasons it is not possible given the location of the land upon which the house is built for the owner to acquire the freehold.  An example of this might be where the house is constructed upon a podium structure or similar above for example underground parking or a passageway.

It was also stated that the government will also ensure that no leasehold houses can be purchased with the support of the government’s Help to Buy Initiative in what looks to be good news for first time buyers and those looking to get on the property ladder in the form of a leasehold property with or without the support of the Help to Buy Scheme.

The abolition of ground rents will mean that it is now increasingly likely that upon the completion of a development house builders will simply be inclined to transfer the freehold of all common parts, including the land upon which blocks of apartments etc. are constructed to the management company. This is because it is likely that there will no longer be any financial value in the freehold interest, either to the developer or to any third party who may wish to acquire the landlord’s interest as an investment.  In this scenario all owners upon the development of leasehold properties who are members or shareholders of the management company will also have an interest in the freehold.

These measures have been anticipated for some time although there had been uncertainty as to their extent and whether or not there would be a full abolition of ground rents or just a financial cap, either at a fixed figure or at a percentage of the value of the property.

The comments given on Thursday 27 June seem to indicate clearly that the government’s intention is to accelerate a full abolition of ground rents and this shall be legislated for as soon as parliamentary time allows.

Mr Brokenshire MP was not pushed for a target date for delivery of the draft legislation; which quite frankly remains anyone’s guess given the very obvious agendas which occupy the majority of parliamentary time at present.

Mathew Lutkin

About the author

Mathew Lutkin

Mathew joined the firm upon relocating to Bishop’s Stortford in September 2014, and is an Associate within the Commercial Property department.

Mathew graduated from the ...

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