A step in the right direction for leaseholders?

Whereby leaseholders are faced with large escalating ground rents leading to a detrimental effect on the market value of their properties.  The Act received Royal Assent on the 8^th February 2022 and is expected to come into force in six months’ time, if not before.

Once the Act comes into force, landlords who request a ground rent for certain types of new residential leases could face enforcement action by Trading Standards and receive a fine of anything from £500.00 to £30,000.00 and enforcement action can be taken against former landlords as well as current landlords.

The Act provides that ground rents exceeding the permitted rent (normally a peppercorn) on new leases which are defined as ‘Regulated Leases’ under the Act are prohibited.

This is particularly important for landlords and leaseholders who are looking at informal lease extensions as a deemed surrender and re-grant will amount to a ‘Regulated Lease’ and special conditions will apply to the permissible ground rent.

The Act will not impact on statutory lease extensions which are granted under The Leasehold Reform Housing and Urban Development Act 1993 or The Leasehold Reform Act 1967 as lease extensions under these statutes would result in a peppercorn ground rent in any event.

When the Act comes into force, a Regulated Lease will include a lease granted by virtue of a variation which gives rise to a deemed surrender and re-grant even if no premium is payable.  Any document which affects the term or alters the demise is by operation of law a Deed of Surrender and Re-Grant.  These leases would be caught by the Act and the landlord will no longer be able to charge a ground rent for the extended term. Landlords and leaseholders should be aware however, that the existing ground rent will continue for the remaining term of the original lease, but the extended term will be reduced to one peppercorn per annum (nothing).