Leasehold Changes Take Effect

Agents have been made aware of the impact on affected properties bought and sold from this date, with only a peppercorn ground rent being legal on new residential leases established after the commencement of the Act. Leases for business premises are not affected.

Leases impacted

The new provisions apply where:

• A lease is granted on or after 30 June 2022
• It is a long lease (exceeding 21 years) for a single dwelling
• It was granted for a premium (usually known as the “purchase price”), and includes where a lease has been changed by a ‘deemed surrender and regrant’ and no premium was required

They do not apply where:

• A lease is not a regulated lease
• Buyers and sellers exchange contracts for a lease (other than an option or right of first refusal) before 30 June 2022, even if the lease itself is granted after 30 June 2022
• Leases are for community-led housing, certain financial products, and business leases 
• Voluntary or non-statutory lease extensions, which can retain the existing level of ground rent for the remainder of the original lease period
• In a shared ownership lease, where rent is payable on the landlord’s owned share and the peppercorn rent limit applies to the leaseholder’s owned share

Collection fees outlawed

In addition to ground rents being restricted to a peppercorn for affected properties, the Act also bans landlords from charging a fee related to collecting a peppercorn rent. There is no obligation to actually collect a peppercorn from leaseholders.

Statutory lease extensions for flats must already be granted at a peppercorn, and statutory lease extensions for houses remain unchanged. Enforcement of the new provisions will be by Local Authorities, who can order any prohibited ground rent to be repaid.

Detailed guidance

Guidance from the UK Government for leaseholders, freeholders and managing agents has been published to accompany the new provisions, and the How to Lease guide has also been updated. 

John Hoole Estate Agents in Brighton and Hove - Source: Propertymark 27 June 2022