Continuation of ground rents for 20 years ‘disappointing’, CIH says

It comes after the government consultation on ground rents, launched in November, included capping the charge at a peppercorn rate for existing leaseholders.

The Leasehold Reform (Ground Rent) Act 2022 means that if any ground rent is demanded as part of a new residential long lease, it cannot be charged at more than the cost of one peppercorn per year – effectively setting the rate to zero.

However, this currently only applies to new leases.

Mr Gove said the consultation was launched to help protect those leaseholders who can be faced with ground rent clauses in their leases, which result in spiralling payments with no benefit in return.

He said the changes would deliver on the government’s manifesto commitment to create a fairer system for millions of leaseholders.

James Prestwich, director of policy and external affairs at the CIH, said the ground rents news was “disappointing”. 

He said: “As CIH set out in our housing manifesto, the government should use the opportunity of legislation to fundamentally reform the leasehold system, building on the Law Commission’s recommendations, which benefits existing as well as prospective owners. 

“Given the 2017 Conservative Party manifesto commitment to reduce ground rents to zero, the idea that current leaseholders will need to continue to pay ground rents well into the future is disappointing, though the anticipated introduction of a £250 per annum cap will provide some protection and certainty.”

Mr Scoffin, founder of anti-leasehold campaign group Free Leaseholders, said an immediate £250 cap before the phase-out of ground rents is a “huge win” for leaseholders. 

“You had to be deluded to believe that ground rents would be peppercorned overnight. 

“After all, leasehold has for generations benefited from the special protection of the establishment,” he said. 

He added: “But all eyes will be on the Wednesday announcement. What is the wording of the provisions? Will there be a commencement date, or will it be left to Labour in government to bring in the cap and phase-out?

“Labour’s [housing minister] Matthew Pennycook has told parliament he is personally supportive of peppercorn, but the party as a whole has no formal announced policy.”

Mr Scoffin stated that ground rents are important, but “equally important is ending service charge abuse”. 

“If the government doesn’t address that in this bill by requiring share of freehold on new flats for resident control from day one and turbocharging Right to Manage and enfranchisement for existing leaseholders, we will all have to wait longer for this racket to come to an end,” he said. 

The NLC said the £250 cap is “disappointing”. 

Founder Katie Kendrick said the group  acknowledges that the move will help some leaseholders “but ultimately it doesn’t go far enough”. 

“Leaseholders deserve so much more. This was a once in a generation opportunity for bold meaningful change. 

“Keeping ground rents at a monetary value continues to legitimise ground rents as an asset class. This is a missed opportunity to bring forward meaningful change towards abolishing leasehold like the rest of the world has already done. 

“With a general election looming the next government is going to need to be ready to pick up the baton and deliver all of the law commission recommendations in full and without further delay. Leaseholders have waited long enough.”

A Department for Levelling Up, Housing and Communities spokesperson said: “It is not fair that many leaseholders face unregulated ground rents for no clear service in return. 

“As set out in our 2019 manifesto, we are committed to reducing ground rents to a peppercorn, and we have already legislated to remove ground rents for new residential leases.

“We recently consulted on a range of options to cap ground rents for existing residential leases and we are carefully considering the responses. We will make an announcement in due course.”

Earlier this month, Inside Housing looked at how leasehold reform might affect registered providers, and followed this up with a deep dive into how insurance premium hikes on tower blocks are affecting housing associations, councils and leaseholders.