Leasehold reform: government undecided on ‘peppercorn’ ground rent

The Law Society Gazette is reporting on the government’s pledge to slash ground rents for leaseholders has been met with uncertainty, as reports suggest resistance from both the Treasury and Downing Street. The proposed measure to cap ground rents at a ‘peppercorn’ rate for existing leaseholders, as consulted on by the Department for Levelling Up, Housing and Communities, is facing opposition from key government departments.

Despite this, a spokesperson for the Department for Levelling Up, Housing and Communities reaffirmed the government’s commitment to strengthening protections for leaseholders and implementing reforms through the Leasehold and Freehold Reform Bill. The spokesperson highlighted the unfairness of leaseholders facing unregulated ground rents without guaranteed services in return, referencing recent findings by the Competition and Markets Authority that ground rents are unnecessary both legally and commercially.

The government is currently reviewing responses to the consultation and will announce its policy in due course. Any chosen option would likely be incorporated into the Leasehold and Freehold Reform Bill, which is scheduled for its second reading in the House of Lords. During this reading, members will raise concerns and propose changes to specific areas of the bill.

It’s worth noting that the Leasehold Reform (Ground Rent) Act 2022 already sets ground rent for new leasehold properties at ‘one peppercorn’ per year, aiming to address concerns around escalating ground rents for leaseholders.

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