New bill to address controversial leasehold ground rents

19 May 2021

The Leasehold Reform (Ground Rent) Bill has begun its journey through the House of Lords and is expected to come into law in the next few months. 
As expected, it restricts ground rents on new long residential leases to a peppercorn.  Most developers are familiar with this in the context of Help to Buy sales, but it will soon apply to all new flat sales. 
“New” will apply to the date of completion of the relevant plot lease, so it is possible for this to result in some plots on a site being caught whilst others are not.
There will be an exemption where contracts have already been exchanged when the Act comes into force, but we expect it to become the norm for plot buyers to demand no ground rents – even if the Act hasn’t yet come into force. 
Developers who have pre-sold their freehold investment will need to take advice on whether their pre-sale contract allows the grant of peppercorn plot leases.

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