The draft of the Leasehold Reform (Ground Rent) bill has been released providing the detail behind the Government's plans to abolish ground rent in new residential leases. Any leases granted before the legislation comes into force, or pursuant to an agreement entered into before that date will not be affected. So, the legislation will not have retrospective effect.
The Bill does not contain any massive surprises - ground rent above the annual rent of a peppercorn is prohibited with some limited exceptions: business leases, leases granted pursuant to the Leasehold Reform Act 1967 and the Leasehold Reform, Housing and Urban Development Act 1993, community housing leases and home finance plan leases.
The provisions will also apply to existing leases where there is a surrender and re-grant of that existing lease. However, the rent payable under the original lease can continue until the end of the term of the original lease. So, if a lease was granted for 99 years with 80 years remaining and is surrendered and re-granted for a lease of 999 years, the rent payable under the original lease will continue for the remaining 80 years of the initial term.
These provisions can be enforced either by the local authority, who have the power to levy financial sanctions against landlords who demand payment of a prohibited rent of up to £5,000 together with interest on any rent paid. Tenants are also entitled to apply for a refund of any prohibited rent paid by way of an application to the First-Tier Tribunal, together with interest. This will no doubt be welcomed by tenants as local authorities can be slow to take such enforcement action due to a lack of a resources.
There is no deadline for when the legislation is due to come into force, however, the bill states that it will not apply to retirement home leases before 1 April 2023.
This is all subject to any changes made as the bill progresses through Parliament.