Possible U-turn on abolition of ground rents

posted by daniel@lease-advice-bureau.co.uk
Date:  25/03/2024
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The Conservatives are facing criticism for potentially not following through on their promise to eliminate ground rents, with reports suggesting that Michael Gove is struggling to make changes to current leasehold laws.

While there exists the Ground Rents Act 2022 which prohibits new ground rents in new leases and within the current form of Leasehold Reform Bill is the entitlement for a leaseholder to buy out their Ground Rent provision in their leases (although only leases with at least 150 years unexpired are eligible) there was also a commitment made by the government to abolish Ground Rent entirely.

Gove, who is in charge of leveling-up efforts, has been working on a reform bill to revamp the leasehold system. However, key provisions to overhaul leaseholds were missing from the legislation published in November.

After a consultation on capping ground rents, Gove had mentioned the possibility of reducing them to a symbolic “peppercorn” rate (essentially meaning nil) as the bill goes through parliament.

But recent reports indicate that Gove may not be successful in pushing for the peppercorn rent due to pressure from investors and pension funds who benefit from predictable income through freeholds.

There is talk of a potential compromise with a £250 annual cap on ground rents instead.

Gove had previously promised to abolish the leasehold system entirely, calling it outdated and feudal. Millions of property owners in England and Wales operate under leaseholds, a system unique to these countries.

Although the reform bill includes some changes like extending lease lengths and making it easier to convert to freeholds, the pledge to restrict ground rents to a peppercorn rate has not materialised due to resistance from Downing Street.

Critics, including Angela Rayner, the shadow leveling-up secretary, are questioning the government’s commitment to leasehold reform and accusing them of breaking promises made in their manifesto. Rayner emphasized Labour’s commitment to comprehensive leasehold reform based on the recommendations of the Law Commission.

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