Overview

The Leasehold Reform (Ground Rent) Bill aims to abolish ground rents for most new long leases on houses and flats in England and Wales. It makes most ground rents a peppercorn rent (one peppercorn per year), effectively making them zero, and establishes enforcement mechanisms to ensure compliance.

Description

This bill significantly alters the rules surrounding ground rent payable under long leases (leases exceeding 21 years) of dwellings. It prohibits landlords from charging ground rent beyond a peppercorn rent for most new leases granted on or after a specified commencement date (except for certain types of leases detailed below). The bill defines "regulated leases" as long leases of single dwellings granted for a premium after the commencement date, excluding specific exceptions.

Excepted Leases

The bill outlines several exceptions where ground rent above a peppercorn rent might still be permissible. These include:

• Business leases where the dwelling's use significantly contributes to the business.
• Leases granted under statutory lease extensions.
• Community housing leases.
• Home finance plan leases.

Specific criteria are defined for each exception, often involving written agreements or compliance with regulations set by the Secretary of State or relevant authority.

Permitted and Prohibited Rent

The bill differentiates between permitted and prohibited rent. For most regulated leases, the permitted rent is a peppercorn rent. Exceptions are made for shared ownership leases (where the landlord's share can have any rent) and leases replacing pre-commencement leases (where a limited amount of rent may be permitted for a transition period).

Enforcement

The bill empowers local weights and measures authorities and district councils (as enforcement authorities) to impose financial penalties (between £500 and £30,000) on landlords who breach the prohibition on excessive ground rent. Tenants can also apply to an appropriate tribunal to recover prohibited rent and interest. The bill also outlines procedures for appeals and the use of penalties collected.

Government Spending

The bill does not directly provide figures for the impact on government spending. However, there will be administrative costs associated with enforcement and potential legal challenges. There may also be indirect costs if the government has to compensate landlords if the restrictions affect their property valuations. Conversely, the government will likely save money as the majority of future leaseholders will not pay ground rent. Further analysis is needed.

Groups Affected

• Landlords: Significantly affected as their income from ground rent will be drastically reduced or eliminated for new leases, potentially affecting the value of their property investments.
• Leaseholders: Primarily benefit as they will no longer pay significant ground rents in most new leases, reducing their long-term housing costs.
• Enforcement Authorities: Will incur costs associated with enforcement and administration but gain the ability to collect financial penalties.
• Legal Professionals: May see an increase in work related to leasehold disputes and appeals.

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