Leasehold consultation opens with proposal to slash ground rents on existing leases

The Department for Levelling Up, Housing, and Communities (DLUHC) will consult on five proposals to decide the best way forward to benefit leaseholders. 

Beyond setting ground rents at a peppercorn, the options include putting in place a maximum financial value which ground rents could never exceed, or capping ground rents at a percentage of the property value.

The proposals could also see a limiting ground rent in existing leases to the original amount when the lease was granted, or freezing ground rent at current levels. 

Mr Gove added: “People work hard to achieve the dream of homeownership. They plan, toil, sacrifice, save, and should rightly be proud to get on the housing ladder.  

“However, far too many are burdened with onerous ground rents – these punitive charges can leave some paying thousands of pounds a year for nothing in return.

“Ground rent can feel like an annual reminder that you do not own the land your home stands on, that your lease on it is finite and that there is a payment for the privilege of staying there. 

“Today we are taking further steps to right that wrong – consulting you, the public, about how best to change this system so leaseholders are not exploited any longer and can take back control of their own destiny.”

However, a number of legal experts have already warned Inside Housing that the ground rent cap may never be realised as it will be politically difficult to achieve, and challenging to find the right balance between the competing interests of leaseholders and landlords.

Another legal expert also pointed out that there is still some clarity needed on shared ownership leases.

A report by the Commonhold Now campaign group, published ahead of the King’s Speech, called for all ground rents on all existing leases to be capped at £250 a year and all new build flats to be sold on a commonhold or share of freehold basis.

Following the release of the government consultation, the group is now urging ground rent to become a peppercorn, which is zero financial value.

Harry Scoffin, co-founder of Commonhold Now, said: “This is a consultation that shows the government wants to end this dodgy asset class in ordinary people’s homes. 

“By reducing or abolishing ground rents, the cost for leaseholders to buy out their freeloading freeholders, and thereby gain control of their buildings and service charge bills, will be slashed.

“This is good politics and good policy. Ground rent is the ultimate money for nothing scheme. Given the government has already passed a law to ban ground rents for all new leases, it would make sense for them to make a radical intervention to free existing leaseholders from monetary ground rents.

“A two-tier market is opening up without action to help those of us already suffering ground rents. This is both a fairness and cost of living issue.”