Government announces ban on ground rent charge for leases

The UK government has announced a ban on charging ground rent on leases in England and Wales, from 30th June 2022. 

This ban is set to put an end to increasing annual costs, and is the first step in a reform package to create a fairer housing system. 

Landlords will be banned from charging future leaseholders for this, which aims to lead to more transparent homeownership and levelling up opportunities for more people. Many landlords have already reduced ground rent to zero for new buyers. 

Leasehold minister, Lord Stephen Greenhalgh, said: “This is an important milestone in our work to fix the leasehold system and level up home ownership. 

“Abolishing these unreasonable costs will make the dream of home ownership a more affordable reality for the next generation of homebuyers.”

Ground rent is used to give leaseholders the right to live in a property for a fixed number of years, which is usually paid annually for long leases, but this has come under fire in recent years for costing homeowners hundreds per year, with some seeing theirs double in the space of 10-15 years.

It has also meant many have struggled selling their leasehold properties or obtaining a mortgage, and there is an increased risk of losing their property if they fail to keep up with crippling payments. 

Additional measures announced in January 2021 gave a new right for leaseholders to extend their leases to 990 years at zero ground rent. 

The Competition Markets Authority (CMA) previously secured commitments with major home builders to stop doubling ground rent charges every year. 

What do you think of this move and what it means for the construction industry? Let us know!