The Leasehold Reform Bill Explained

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The Leasehold Reform Bill took another step forward on Monday when it passed its first stage in the Commons. The bill, which the House of Lords has already passed, will now undergo further scrutiny by MPs before it can become law.
The bill would effectively mean that anyone buying a new Leasehold house or flat wouldn’t pay any ground rent other than what is known as ‘’One Peppercorn’’.
It is normal for someone buying a property in a shared building, such as a flat, to own just the Leasehold, which is often set at 125, 250 or 999 years with somebody else owning the freehold who a Leaseholder pays ground rent to, which escalates over time. The freehold being the land on which the property is built and the building as a whole.
The arrangement is increasingly being applied to people purchasing new build houses. Many buyers are unaware of the consequences and the rising ground rent charges when no meaningful service is provided.
Mortgage lenders are treading more carefully with Leasehold houses and even some flats, where it is deemed that the ground rent is set too high and or the increases are unreasonable.
The Leasehold Reform Bill stipulates setting the ground rent at ‘one peppercorn’. Labour wish to take the legislation further, with leases for both old and new houses being banned and a complete ban on the selling of houses without a freehold.
Earlier this year, at least five major developers abolished ground rents on new build flats and houses, several of whom were being investigated over the potential misselling of Leases. However, it remains to be seen whether more developers will follow suit, with many resisting, although new legislation may force their hand.
Interesting Fact:The term peppercorn is thought to date back to the 16th or 17th century when it was highly valuable when bought in bulk, but a single peppercorn was deemed worthless. Today, a Freeholder can physically demand the payment of one peppercorn, but clearly, they are very unlikely to do so.
You can read a full copy of the bill here -https://researchbriefings.files.parliament.uk/documents/CBP-9236/CBP-9236.pdf

This post was written by:

Andrew Griffith

As a highly motivated and proactive Estate Agent, my in-depth understanding of our marketplace drives me to maintain the high standards and integrity that power our company. Our vision is to provide an estate agency service with the market strength of a large corporate agency, yet firmly grounded in core principles of integrity and honesty.

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