The Leasehold Reform (Ground Rent) Act 2022 comes into force today, effectively abolishing ground rents for many long residential leases granted on or after 30th June 2022. 

What is the Act? 

The Act forms part of the Government’s agenda for leasehold reform and is viewed as one of the most significant changes to property legislation in a generation.  The aim of the Act is to prevent the creation of onerous ground rent payments to create a fairer and more transparent ownership of leasehold property.

What does the Act change?

The Act will limit the ground rent that can be charged for many new residential leases and extended terms of lease extensions to a ‘peppercorn rent’ per year.  ‘Peppercorn rent’ essentially limits the ground rent to zero.

Will the Act apply to me?

The new act will apply where:

The Act will not apply to existing residential leases but if the lease is varied in such a way that there is a deemed surrender and regrant, the new lease will be subject to the peppercorn ground rent cap.

  • A new residential lease is granted on or after 30 June 2022;
  • It is a long lease (i.e., exceeding 21 years); and
  • It was granted for a premium, otherwise known as a ‘purchase price’.

The Act will also apply if you are currently extending your lease and the extension does not complete before 30th June 2022.  If the lease extension is to complete after this date, the terms will need to be revised to include a peppercorn or nil ground rent.   

If you have exchanged contracts before 30th June 2022 but completion of the new lease takes place after this date, the lease will not be caught by the Act and ground rent above a peppercorn can be charged.

The Act excludes business, community housing and home finance leases.  Retirement leases will be exempt until at least 1st April 2023.

If you would like advice on whether proposed variations or grants of leases will fall within the Act please get in touch with our Residential Property Team on 020 8680 2638