Can I get some Peppercorn with that Lease?

Many of you may not be aware that the Leasehold Reform (Ground Rent) Bill comes into force on 30 June 2022. What does this mean for leaseholders?

This Bill will apply to all new leases (with a term of more than 21 years) and granted for a premium of a single dwelling (a flat or a single house). These leases will be known as ‘Regulated Leases’ under the Act and must be granted at a ‘peppercorn’ rent unless they are an ‘Excepted Lease’.

Excepted Leases are:

  1. a) business leases;
  2. b) houses and flats extended under the Leasehold Reform Act 1967 or the Leasehold Reform, Housing and Urban Development Act 1993 (already reduced to a peppercorn);
  3. c) community housing; and
  4. d) home finance plan leases (granted by financial provider under the rent to buy scheme).

Ground Rents under these leases will either be:

  1. a) Prohibited = no requirement to pay; or
  2. b) Permitted = peppercorn or rent under a shared ownership lease.

What is meant by a peppercorn rent?

A peppercorn has no financial value and is a token or nominal rent. As ever, English Law never fails to give surprises and you may find leases specifying other token rents such as £1 or even one red rose per year!

Consequences for breaching the law:

Freeholders who unlawfully charge ground rents will be prohibited from doing so and any breach would be classed as a civil offence and the offender may incur financial penalties ranging between £500 and £30,000 (Freeholders be warned!). Also, leaseholders protected within the Act will be able to have any sums paid to the Freeholders refunded.

So, what does this mean for current tenants you may ask?

Unfortunately, this Act only applies to new leases and current owners of leasehold properties will have to wait to see what regime the government proposes to introduce in this respect.

 

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