Ground rent payments to end on new residential long leases - Kuits Solicitors Manchester
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Ground rent payments to end on new residential long leases

Ground rent payments to end on new residential long leases

24th May 2022 - Published by Kuits Residential Property Team

In a drive to make owning leasehold residential property fairer and more affordable for leaseholders, the Government has recently announced that the main provisions of The Leasehold Reform (Ground Rent) Act 2022 (LRGRA 2022) will be brought in on 30 June 2022, covering most new long residential leases in England and Wales.

The new legislation brings significant changes to property law and once in force will abolish ground rents for qualifying residential long leases.

What is the Leasehold Reform (Ground Rent) Act?

The Act limits ground rents in most new long residential leases to one peppercorn per year, a restriction that effectively means that ground rents will have zero financial value. A long lease is identified as being a lease with a term of over 21 years.

Subject to certain exceptions, the ground rent restrictions apply to long leases of single dwellings granted for a premium on or after commencement of the relevant provisions, referred to in the LRGRA 2022 as ‘regulated leases’.

The landlord under a regulated lease, or anyone acting on their behalf, must not ask the tenant for payment of prohibited rent or fail to refund such payment within 28 days of receipt.

Who does this benefit?

This prohibition continues to apply to a landlord after it has assigned the reversion, and benefits:

  • the current tenant under the lease;
  • a previous tenant;
  • anyone acting on their behalf and;
  • any guarantor.

What type of leases are exempt from the new restrictions?

The following types of leases are excepted from the ground rent restrictions:

  • Business leases
  • Statutory house extensions of houses and flats
  • Community housing leases
  • Home finance plan leases

Additionally, the ground rent restrictions will not apply to either of the following:

  • Leases granted before commencement of the relevant provisions of the LRGRA 2022
  • Leases granted pursuant to contracts exchanged before commencement

Enforcement, fines and tribunal declaration

If a landlord makes a demand for ground rent in relation to a regulated lease and/or fails to repay any rent received within 28 days of receipt, the landlord will be liable to a fine of between £500 and £30,000 per lease.

The legislation will be enforced by Trading Standards authorities and as part of their powers will be able to order repayment of prohibited rent, plus interest, by past and current landlords and those acting on their behalf.

As an alternative, tenants can apply for an order to recover unlawfully charged ground rents, plus interest, through the First-tier Tribunal in England or a Leasehold Valuation Tribunal in Wales.

Going forward, any term in a regulated lease reserving a prohibited rent will be replaced by a term reserving the relevant permitted rent. Either a tenant or landlord of a regulated lease will be able to apply to the relevant tribunal for a declaration as to the effect of section 7 on a term in the lease.

If the tenant is the Registered Proprietor of the lease, the relevant tribunal can also direct the landlord to apply to the Land Registry and pay the fee, to enter a declaration in the registered title. Alternatively, the tenant can make the application.

Get in touch with a Residential Property lawyer today

If you would like more advice on the new legislation, or any other Residential Property issue, please get in touch with Senior Associate Claire Heron on 0161 838 7874 or email claireheron@kuits.com.

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