ALL CHANGE FOR LEASEHOLD – BY RICHARD SNAPE

Richard Snape is a leading authority and speaker on conveyancing matters. In this article, Richard discusses the changes proposed during the Queen’s Speech on ground rents and other planned reforms.

The Government has been consulting on ground rents for several years now.  We were promised a Housing Reform Bill in the Queen’s Speech of December 2019, but this never materialised.  There was also a press release from the Ministry of Housing, Communities and Local Government in January 2021 on leasehold reform.  On 11 May 2021, in the Queen’s Speech, the Government announced that it would proceed with ground rents reform for new but not existing leases.  Amazingly, on the following day the Leasehold Reform (Ground Rent) Bill 2021 was published and had its first reading in the House of Lords.

When it becomes law, residential leases of more than 21 years will have to be at a peppercorn rent.  This will not apply to shared ownership leases for fairly obvious reasons.  Other exemptions will be in relation to community-led housing, equity release schemes and Sharia mortgages when based on a lease back.  Business leases will also be exempt where a person lives in the premises for the better performance of their job.

There will be a civil penalty where a ground rent is charged and the landlord may be fined up to £5,000.

The legislation is long overdue, and in reality large numbers of developers were only charging a peppercorn rent on their newbuilds anyway.  One suspects that the problems with existing ground rents will remain for many years to come.  It is also a shame that the Government still seems blissfully unaware of the higher ground rent problem whereby a rent of more than £250 per annum (£1,000 per annum in Greater London) may give rise to an assured tenancy.  This could easily be amended by a statutory instrument which could come into force after three weeks after being laid in front of Parliament.

The legislation is amongst a raft of provisions being planned.  We already have the Fire Safety Act 2021 which, after much toing and froing between the House of Commons and the House of Lords, finally received the Royal Assent on 29 April 2021.  This amends (or according to the Government, clarifies) the Regulatory Reform (Fire Safety) Order 2005 whereby fire safety risk assessments in residential blocks must cover the exterior, external doors and windows, internal doors which open into common parts, and balconies.  The Government intends to proceed with a Building Safety Bill 2021 in relation to blocks of flats of 18 metres or more in height.  It also plans reform of leasehold enfranchisement and a Renter’s Reform Bill which will abolish S21 assured shorthold notices.  In England there is also a Planning Bill which the Government intends to proceed with although a backbench rebellion seems likely.

If all this comes to fruition conveyancers will be facing major changes, in particular in relation to leaseholds and will have to adapt accordingly.  These are indeed exciting times.

Richard Snape May 2021

DISCLAIMER:  Nothing said in this article constitutes legal or other professional advice and no warranty is given nor liability accepted for the contents of this article. Richard Snape, Davitt Jones Bould and LawSure Insurance will not accept responsibility for any loss suffered in consequence of reliance on information contained in the article.