On 8 February 2022, the Leasehold Reform (Ground Rent) Bill received Royal Assent and became the Leasehold Reform (Ground Rent) Act 2022 (“the Act”). The Act, when it fully comes into force, will have the effect of limiting the amount of ground rent chargeable on most new residential long leases to one peppercorn per year. This essentially means, ground rent will be abolished. The Act is not yet in full effect, as it awaits the Secretary of State to give regulations as to the commencement date.

Subject to exceptions, the ground rent changes will apply to leases of dwellings granted on or after commencement of the Act. The Act is not retrospective, so leases entered into before the Act comes into effect can still demand ground rent and there is no cap. A lease entered into after the Act comes into effect, pursuant to an option or right of first refusal pre-dating the Act, will not be subject to its provisions.

The Act will also ban freeholders from charging administration fees for collecting a peppercorn rent.

The Government will also enforce the charging of a prohibited ground rent by way of a civil penalty regime, including fines of up to £30,000 for freeholders that charge ground rent in contravention of the Act.

If you have any queries related to ground rent, or other long leasehold issues, please get in touch with our Property Litigation team by contacting Joe Brightman or Molly Frankham.