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Experts call for ground rent at minimum rate to help embattled leaseholders

Experts call for ground rent at minimum rate to help embattled leaseholders
Anna Sagar
Written By:
Anna Sagar
Posted:
24/01/2024
Updated:
24/01/2024

Propertymark says that setting ground rent at peppercorn value will lead to a “fairer leasehold system”.

In response to a Government consultation on leasehold, the professional body for property agents Propertymark said that one advantage of a ‘peppercorn’ cap on ground rent (the charge for renting out the land from the freeholder), would be that existing leaseholders would not have to pay an annual fee for no guaranteed service.

A ‘peppercorn’ rate is defined as an minimal or nominal rent (a peppercorn, a penny etc.) paid only to form a legally binding lease contract and create a legal relationship between landlord and tenant.

Other advantages of ‘peppercorn’ cap highlighted by Propertymark include making it for leaseholders to sell their property and lowering the cost of living in a leasehold property as ground rent is often charged alongside annual service charge, estate charges or additional administration charges.

The suggested reforms, which are included in the Leasehold and Freehold Reform Bill, are in addition to extending the standard lease extension term for leaseholds to 990 years from 90 years which will mean leaseholders could be thousands of pounds better off and the value of their property could increase.

Research from Propertymark show that 78%of property agents said that leasehold properties with escalating ground rent will struggle to sell, even if priced correctly.

Ground rent at a peppercorn creates ‘level playing field’

Timothy Douglas, head of policy and campaigns at Propertymark, said: “Out of the options provided by the UK Government, setting ground rents at a peppercorn value is the only real way to create a level playing field between existing and new leaseholders.

“Action must be taken through legislation as we know from Propertymark member agents that leasehold properties with escalating ground rent are harder to sell. Additionally, the UK Government need to ensure that property professionals can better identify freeholders so they can support consumers with their lease and these proposals can be enforced.”