Government consults on proposed exemption from ground rent cap

It is also seeking evidence from those who have agreed such a lease or have professional experience of this area.

The government explained that the ground rent cap is not intended to be an intervention in the price paid for a leasehold property itself, noting that in a genuine quid pro quo lease, the ground rent has been negotiated as part of the purchase price.

“It could therefore be seen as disproportionate to cap the rent at £250 if the lease is exempt. However, we are also conscious that if quid pro quo leases contain terms that have been shown to cause consumer harm, allowing them to continue would undermine the objectives of the ground rent cap,” it added.

In May, a cross-party group of MPs called on the government to bring forward its ground rent cap and cut the transition period in half, while creating an independent regulator for property management agents.

The recommendations came as part of the Housing, Communities and Local Government Committee’s probe into the draft Commonhold and Leasehold Reform Bill.

A major proposal is asking the government to go further in its legislation by creating an independent regulator for property management agents.

Alongside this, the proposed £250 ground rent cap, currently coming into force in 2028, should be brought forward by a year.

The committee also questioned the government’s evidence base for the proposed 40-year transitional period to zero ground rent, and believes a shorter transitional period of 20 years would be a fairer balance between leaseholders, freeholders and institutional investors.

The report also expresses concern that several vital recommendations previously made by the Law Commission are entirely missing from the draft bill.

The report states these measures, which the government’s manifesto promised to enact, would make it easier and more affordable for existing leaseholders to convert to commonhold.