It is the first step in its housing reform package
The UK Government confirmed on Friday that a ban on ground rent on new leasehold properties in England and Wales will be implemented by the end of June.
“From June 30, 2022, anyone buying a home on a new long lease will now be freed from these annual costs, helping homeowners manage their bills as they face cost-of-living increases,” a report posted on the government’s website stated
The government is taking action to rid future homeowners of an annual cost – known as ground rent - which can sometimes cost £100s a year. Ground rent is a charge that leaseholders pay to their freeholder – usually paid annually for long leases.
Under a new law, landlords will be prohibited from charging ground rent to future leaseholders.
Leasehold Minister Stephen Greenhalgh said the ground rent ban is an important milestone in the effort to fix the leasehold system and to level up homeownership.
“Abolishing these unreasonable costs will make the dream of homeownership 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,” Greenhalgh said.
Timothy Douglas, policy and campaigns manager for Propertymark, said the abolishing of these “unfair and restrictive charges levied on leasehold homeowners” had been a long time coming.
“Propertymark has been a strong campaigner on this issue, and it was our investigation in 2018 that helped bring the scale of it to light for the first time, revealing the impact it was having on the housing market as leasehold homeowners struggled to improve or sell their properties as a result,” he stated.
“These changes only legally restrict ground rents on new leases, so we hope they are a catalyst for further reform by the housebuilding sector itself and the UK Government that will release the estimated over one million existing homeowners who remain locked into these agreements.”
The government, however, said that the legislation against ground rent was only the first part of its reform package that will make homeownership cheaper, fairer, and more secure.
Future measures, announced last year, include a new right for leaseholders to extend their leases at zero ground rent and an online calculator to help leaseholders find out how much it would cost to buy their freehold or extend their lease.
Thousands of existing leaseholders have also already seen a reduction in their inflated ground rent costs. In a government crackdown, the Competition Market Authority (CMA) secured commitments with major homebuilders to stop doubling ground charges every year for leaseholders.
Read more: Thousands of leaseholders freed from paying doubling ground rents.
Those who own properties with Aviva, Persimmon, Countryside Properties, Taylor Wimpey, and others will see their ground rent returned to the rate it was when they first bought their home. The CMA’s investigation is continuing into Barratt Developments, Brigante Properties, and the investment group Abacus Land and Adriatic Land.
The ban on landlords charging ground rent on new residential leases will also apply to retirement homes, and this measure will come into force no earlier than April 01, 2023.
