Capping Ground Rents – The Consultation

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Following the King’s Speech on 7 November 2023, the Government has begun a public consultation to discuss the potential capping of ground rent that leaseholders have to pay.

The current position is that The Leasehold Reform (Ground Rent) Act 2022 which came into force on 30 June 2022 put an end to ground rents for new, qualifying long residential leasehold properties in England and Wales.  Essentially the Act banned freeholders from charging ground rent of anything more than a peppercorn rent (ie no money can legally be charged).

For existing leaseholders entering into voluntary lease extensions after 30 June 2022, the ground rent payable under the extended portion of their lease will be reduced to a peppercorn rent. For those extending their lease by statute, the ground rent is automatically reduced to a peppercorn rent from the date the new lease is completed.       

The Government’s consultation sets out a series of options to extend the protection to existing leaseholders.

The consultation outlines 5 options.  These are as follows:-

  1. capping ground rents at a peppercorn
  2. setting maximum financial value for ground rent
  3. capping ground rents at a percentage of the property value,
  4. limiting ground rent to the original value when the lease was agreed
  5. freezing ground rent at current levels.

The consultation will be open for 6 weeks (until 21 December 2023).  The Government will carefully consider all responses before responding. You can take part in the consultation via the following link

Modern leasehold: restricting ground rent for existing leases – GOV.UK (www.gov.uk)

We are actively monitoring the position as part of our work in advising both freeholders and leaseholders.

If you wish to discuss any of the topics in this article, please contact us or reach out to a member of the Commercial Property Department.

Disclaimer: General Information Provided Only
Please note that the contents of this article are intended solely for general information purposes and should not be considered as legal advice. We cannot be held responsible for any loss resulting from actions or inactions taken based on this article.

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