Extend the Leasehold Reform Act to ground rent on existing residential leases

Prior to the Leasehold Reform Act, the freeholders could set ground rent at whatever amount they chose. New protections do not extend to existing property owners. Many current leaseholders have found they are unable to sell as mortgage firms and banks may not approve lending on such properties.

The distinction between new leases and old leases puts current owners at a competitive disadvantage.

We understand the difficulties some existing leaseholders face with high and escalating ground rents. Unfair practices have no place in the housing market and the Government is committed to ending them. This is why the Government asked the Competition and Markets Authority (CMA) to investigate potential mis-selling of homes and unfair terms in the leasehold sector.

In 2021, the CMA secured commitments from Aviva, Persimmon, Countryside Properties and Taylor Wimpey to amend their practices, which included commitments to remove lease terms that led to doubling ground rents, and where houses were sold as leasehold, to support leaseholders to buy the freehold at the original price quoted.

On 18 March 2022, the CMA announced that it has secured commitments from 15 landlords who bought freeholds from Countryside Properties. The commitments will remove certain doubling ground rents terms for their leaseholders and revert charges to original rates. Further information is available at https://www.gov.uk/cma-cases/leasehold.

These settlements will help to free thousands more leaseholders from unreasonable ground rent increases. These are hugely important steps and demonstrate our determination to support affected leaseholders.

This action against major industry players serves as a warning to others. We want to see other developers with similar arrangements in place come to the table. We are closely monitoring the outcome of this investigation.

We have brought forward legislation that sets ground rents on newly created leases to zero through the Leasehold Reform (Ground Rent) Act 2022, which came into force on 30 June 2022.

Further leasehold reform will follow later in this parliament. We will supercharge leaseholders’ ability to buy their freehold, helping millions of households genuinely to own their own home with significant discounts for those trapped with egregious, escalating ground rents.

The Government is committed to delivering the second phase of our major two-part leasehold reform. Whilst we cannot set out the precise details of a future Bill at this stage, we have been clear about the need to address the historic imbalance in the leasehold system and further legislation will follow later in this Parliament.

Department for Levelling Up, Housing & Communities