“Monetary ground rent is ‘neither legally nor commercially necessary’, according to the Competition and Markets Authority. If leaseholders are paying for nothing, they should be paying nothing today, not in 2068.
“A ground rent cap not taking effect until the end of 2028 is far too close to the next general election, repeating the foot-dragging of governments of old.”
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In most cases, those who buy a flat do not purchase their home in the same way as those buying a house. A freeholder will own the building permanently, and when a flat comes on the market it is the leasehold being sold – after the lease is up, the property returns to the freeholder. Along with service charges to fund maintenance of blocks, leaseholders often pay ground rents to the freeholders.
These were banned on new properties in 2022, but plans for the ban to be extended are part of the government’s wider Commonhold and Leasehold Reform Bill, published on Tuesday (27 January).
The reforms promises to make service charge bills clearer and easier to understand and help people to challenge unfair costs.
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Alongside leasehold reform, forfeiture is being abolished – meaning leaseholders cannot lose their homes for breaking certain conditions of their lease, including defaulting on debts as low as £350. Flat owners will also be able to convert their buildings to commonhold if there is agreement.
The shake-up will mean leaseholders will have to get used to a new way of doing things, said Sebastian O’Kelly of the Leasehold Knowledge Partnership.
“Flat owners are going to have to co-operate to manage and organise the building,” said O’Kelly.
“There will be plenty of bickering between neighbours – as there is in the rest of the world outside England and Wales that has versions of commonhold – but there won’t be the industrial scale rip-offs of opportunistic freehold investors always looking to monetise their blocks.”
Leasehold reform has been a long-running political issue – with the Conservatives promising reform in their 2019 manifesto and pledging to abolish it altogether by the end of 2023.
Labour had originally promised to abolish leasehold in its first 100 days of government, but later stepped back from the idea.
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“In recent years, ground rents became so aggressive that tens of thousands of homeowners – possibly hundreds of thousands – have ground rents that make selling their properties very difficult if not absolutely impossible,” said O’Kelly.
“This has blighted lives: young people cannot move on and cannot have families as a result.”
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