Ground rent dates from the time of William the Conqueror. This was when the leasehold system was first conceived, in that the freeholder owns the freehold to a particular piece of land and the leaseholder only owns the property. Leaseholders are therefore required to pay ground rent.
The new legislation on ground rent which comes into effect in Spring 2022 is being hailed as the first part of the biggest English property law reform in decades.
Previously, leaseholders of apartments could extend their lease, often at zero or ‘peppercorn’ ground rent, but usually only for 90 years and could be charged extensively to do so. House leaseholders also face barriers and high costs when trying to extend their leases.
The new legislation aims to accelerate the phasing out of ground rent in England in the following ways:
- Existing leaseholders will be given the right to extend their lease by 990 years, whilst previously house leaseholders could extend by 50 years and apartment leaseholders by 90 years.
- New home buyers could also save thousands of pounds in the long term by no longer having to pay ground rent to the freeholder. The new legislation will set future ground rents for new build apartments to zero and is expected to be in place by Spring 2022. This change is for sales of new apartments only, but the government is expected to be looking at and making further changes to the leasehold system as a whole.
- Reforms in 2019 mean new houses must be sold freehold to make sure homeowners are not also paying “rent”.
- When the reforms come into force, ground rent will be gradually phased out as existing leaseholders will also be able to choose to extend the length of their lease and it will be set at zero pounds.
- In the future, there will also be caps on ground rent and set calculation rates to ensure the process is more transparent, fairer and cheaper and an online calculator will be introduced to make it easier.
As a forward-thinking and proactive property developer, at Consero we are already ahead of the new ground rent legislation, and we will not be charging it on any of our properties from now on. It means that new homes in developments such as Britannia Wharf, Heathbourne Village and Sunningdale Villas are ground rent free, and will remain so in perpetuity.
You can find out more about Consero developments and current availability through our new homes page.
