14 April 2022 by

The Leasehold Reform (Ground Rent) Act 2022

The Leasehold Reform (Ground Rent) Act 2022 (“the Act”) has received Royal Assent and is due to come into force this summer.

The Act will apply to new residential long leases (with a term of more than 21 years) granted for a premium and will stipulate that only a peppercorn (nil) rent can be demanded, resulting in a ban on collecting new ground rents. The Act will also prohibit landlords from charging any administration fee for demanding a rent. Whilst the subtle nuances of the Act are yet to be fully appreciated, it is likely that these changes will bring many problems for those in the leasehold sector. Certainly, until such time as a new established way of working comes to fruition.

Whilst the Act is intended to be all embracing, there will be some exemptions. The Act will not apply to business leases for instance.

The Act has been passed as a part of a wider consultation undertaken by the Government into leasehold more generally.

The change in law is expected to come into force on 30th June 2022. It is important to note that following this date, in circumstances where an existing lease is to be extended outside of the 1993 Act ground rent can continue to be demanded by the landlord for the remainder of the term of the existing lease and at identical levels. However, any new ground rent beyond the expiry of the original term must be at a peppercorn for that extended term. A hybrid of sorts that may lend itself to some interesting drafting for lawyers and leasehold practitioners alike.

It will be interesting to see how the Act unfolds. Whilst there are some issues expected, it is certainly gearing up to be a summer of change for all in the sector.

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