The Draft Commonhold and Leasehold Reform Bill, laid before Parliament this week, will phase out ground rents over 40 years and replace forfeiture—where leaseholders can lose their home by defaulting on a debt as low as £350—with a fairer debt enforcement system.
The government estimates about 770,000 to 900,000 leaseholders currently pay more than £250 per year in ground rent.
Housing secretary Steve Reed launched a simultaneous consultation, ‘Moving to commonhold: banning leasehold for new flats’, seeking views on timing, transitional arrangements, exemptions and costs. It ends on 24 April.
Mark Chick, senior partner at Bishop & Sewell and director, Association of Leasehold Enfranchisement Practitioners (ALEP), said: ‘This Draft Bill represents the most substantial shift in land tenure for more than two centuries.
‘There is clear political and public pressure to accelerate change, but reforms of this magnitude must balance speed with care. Rushed legislation rarely delivers clarity or certainty. Similar comments apply to the proposed cap and eventual sunset on ground rents which will potentially be susceptible to Human Rights Act challenges, although the government has been at pains to set out its approach in a policy statement for this very reason.’
Liam Spender, head of real estate litigation at Velitor Law and campaigner for leaseholder rights, said there may be disappointment that ground rents are not being eliminated immediately but, ‘crucially the cap will make it cheaper for people to buy the freehold and to extend their leases, both of which are priced by reference to ground rent values’.
Anna Favre, partner at Cripps, said the reform would, ‘quite rightly, assist leaseholders enduring the injustice of unusually onerous escalating ground rents.
‘However, it will also retrospectively alter long established contractual income streams relied upon by other landlords and institutional investors. The challenge lies in ensuring that the ground rent cap and wider leasehold reforms are implemented in a way that preserves confidence in UK as a stable investment class while delivering fair outcomes for homeowners.’
