Reducing ground rents – what are the proposals for existing leases under the anticipated leasehold reforms?

Since 30 June 2022 (1 April 2023 for retirement homes) new long leases granted at a premium for residential units must be at a peppercorn ground rent S.4 Leasehold Reform (Ground Rent) Act 2022 (“2022 Act”).  These are known as regulated leases.

Existing leases granted prior to those dates were unaffected by the 2022 Act, so those ground rents remain payable in accordance with the terms of the lease.

The proposed leasehold reforms seek to address this imbalance by bringing the ground rent payable under existing older leases closer into line with new leases.

If the proposed provisions under the Commonhold and Leasehold Reform Act pass, tenants of pre-2022 Act regulated leases will be able to serve a Rent Variation Notice on their landlord. This would require their rent to be reduced to £250 per annum for a transitional period of 40 years and thereafter the rent will fall to a peppercorn for the remainder of the existing term.  Similar rights will apply to tenants of leasehold houses and separate provisions are outlined for shared ownership leases.

We will be keeping a close watch on the proposed reforms, commenting further on any changes or details released concerning when the reforms may receive Royal Assent and the dates upon which the reforms will come into force.

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