New law sets ground rent to zero for prospective homeowners

Landlords will be banned from charging ground rent to future leaseholders in England and Wales from 30th June.

Under the Leasehold Reform (Ground Rent) Act, anyone buying a home on a new long lease will be freed from these annual costs which can sometimes add up to hundreds of pounds, yet provide no clear service in return and can be set to escalate regularly, according to the government.

Upcoming changes

It says many landlords have already reduced ground rent to zero for homebuyers starting a new lease with them but that anyone preparing to sign a new lease in the next two months should speak to their landlord to ensure their ground rent rate reflects the upcoming changes.

Leasehold Minister Lord Stephen Greenhalgh adds: “I welcome the move from many landlords who have already set ground rent on their new leases to zero and I urge others to follow suit ahead of this becoming law.”

Online calculator

Measures already announced in 2021 include a new right for leaseholders to extend their leases to 990 years at zero ground rent and an online calculator to help them find out how much it would cost to buy their freehold or extend their lease. In a government crackdown, the Competition Market Authority also secured commitments with major homebuilders to stop them doubling ground charges every year for leaseholders.

Timothy Douglas, policy and campaigns manager for Propertymark, says the unfair and restrictive charges levied on leasehold homeowners have, in some cases, been allowed to become a cash-cow and that abolishing them has been a long time coming. He adds: “These changes only legally restrict ground rents on new leases, so we hope they are a catalyst for further reform by the housebuilding sector itself and the UK government that will release the estimated over one million existing homeowners who remain locked into these agreements.”

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