The Leasehold Reform Act 2022 came into force on 30th June 2022.
A step in the right direction moving forward, with a watchful eye – from the UK government – over some of the eye-watering ground rents landlords were charging their tenants!
Designed to reform and create a fairer housing system, also allowing opportunity for buyers to invest in property without the concern of having to pay additional costs towards ground rent.
What A Leasehold Is, And How It Effects You!
A leasehold is a form of ownership that gives the leaseholder the exclusive right to live in the property for a fixed amount of years, otherwise known as ‘the term’.
This right is documented and agreed upon between a leaseholder and their landlord.
Traditionally, ground rent is an annual charge paid for the long lease to the landlord by the leaseholder, essentially ‘renting’ the property in question on a long-term basis.
Ground rents have been escalating, with little to no regulation, many landlords have been getting away with it.
Whilst leaving leaseholders burdened with the contractual obligation to have to maintain these payments in order to retain the property.
For these reasons, the Leasehold Reform Act 2022 was introduced.
Prompting the government to intervene and regulate this sector to ensure these same difficulties don’t affect future buyers!
The Exciting New Changes With The Leasehold Reform Act 2022!
So, this new legislation means that any ground rent cannot be charged at more than one peppercorn per year. Yep, you read that right, one peppercorn per year.
A weird way of saying that the rate is now near-on nil. Unless you fancy handing over your landlord one actual peppercorn!
Maybe, or maybe not relevant to you. But this ban will also apply to retirement homes, commencing the 1st April 2023!
The Interesting Exceptions That Could Work In Your Favour
The following points are exceptions to the Leasehold Reform Act 2022…
- Existing leases
- Leases granted pursuant to contracts exchanged before 30 June 2022
- Business leases
- Statutory lease extensions
- Community housing leases
- Home finance plan leases
I’m An Existing Leaseholder, Can I Get Any Help?
If you’re an existing leaseholder who then chooses to extend your lease through the informal route, the ground rent will be restricted to zero on the newly extended term.
However, it differs if the extend your lease through the statutory route, a landlord is forced to reduce ground rent to a peppercorn for the entire term of the lease term, right from the date the extension is completed.
All three points above are exactly why the Leasehold Reform Act 2022 was implemented!
The MASSIVE FINES For Landlords That Don’t Comply
The Leasehold Reform Act 2022 gives power to all local authorities to impose fines for up to £30,000 on each qualifying lease, for if the landlord demands ground rent and doesn’t return payment within 28 days.
Definitely a huge deterrent to any landlord assuming they’re above the law…
The EXCITING Upcoming Plans Coming Your Way
Under the Leasehold Reform Act 2022 there are proposed future measures for things such as a new right for leaseholders to extend their leases to 990 years at zero ground rent.
In addition to this, an online calculator to help leaseholders like yourself work out how much it would cost it extend their lease, and even to buy the freehold outright!
The UK government are also looking to crack down on escalating rents through the Competition and Markets Authority, which has secured commitments with major homebuilders.
A truly interesting feat to look forward to, which could help buyers to no end moving forward in this ever-evolving and expensive economy…
Planning to buy a leasehold property as a buy-to-let? Going for a new-build with these regulations imposed could help profit margins to be a long-term sustainable investment!
If you’ve got a property you’d like management of the tenancy looked after…
Feel free to get in touch with one of our property experts to discuss how we can make life easier for you.