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Ground rent charges on new leases to be banned from June

Paloma Kubiak
Written By:
Paloma Kubiak
Posted:
Updated:
22/04/2022

Ground rent charges will be banned on most new residential leases from 30 June, the government has announced.

From this date, prospective homebuyers in England and Wales will no longer be charged ground rent on new lease houses or flats. 

It also means landlords will be prohibited from charging ground rent to future leaseholder tenants, though the government said landlords have already reduced ground rent to zero in preparation of this rule change.

What is ground rent?

Ground rent is a charge that leaseholders pay to their freeholder – usually paid annually for long leases – giving them the right to live in a property for a fixed number of years.

But they have come under fire in recent years, with homeowners facing increasing annual costs – sometimes worth hundreds of pounds a year –while others have seen theirs double every 10-15 years.

It also meant many people struggled to sell their leasehold properties or obtain a mortgage and increased the risk of losing their property if they failed to keep up with the crippling payments.

 The government described the charges as providing “no clear service in return” and has already announced measures to curb them. Just last month, the Competition and Markets Authority (CMA) confirmed ground rents will be charged at the amount set when thousands of customers from 15 investment firms and housing associations bought their properties.

Today’s announcement is part of the Leasehold Reform Act which aims to make home ownership fairer and more transparent for leaseholders. Other changes include the new right for leaseholders to extend their leases to 990 years at zero ground rent and a requirement for housebuilders to stop doubling ground rent every year.

Lord Stephen Greenhalgh, leasehold minister, said: “This is an important milestone in our work to fix the leasehold system and to level up home ownership. Abolishing these unreasonable costs will make the dream of home ownership a more affordable reality for the next generation of home buyers. 

“I welcome the move from many landlords who have already set ground rent on their new leases to zero and I urge others to follow suit ahead of this becoming law.” 

While the ban on landlords charging ground rent on new residential leases will apply to retirement homes, this will come into force from 1 April 2023.