In response to the media outcry on ground rents, the government has launched a consultation, keen to show that it recognises the ‘challenges faced by existing leaseholders with ‘onerous’ ground rents’.
The government’s consultation leans towards restricting the number of available leasehold properties; encouraging developers to sell properties as freeholds wherever possible, and in the case that a property must be sold as a leasehold, to limit or remove a ground rent charge entirely.
The government has proposed measures limiting ground rents in new long leases to a peppercorn for Right to Buy purchasers. The government has distinguished ground rents from service charge or managing agent fees, stating that, as leaseholders receive nothing in return for the ground rent, effectively, they should not have to pay it. The consultation invites responses to this suggestion, and welcomes thoughts on more “reasonable” ground rent regimes. The government seem keen to explore linking increases to the Retail Price Index (RPI) RPI or another verified index.
There will certainly be some unscrupulous developers seeking to exploit purchasers by imposing onerous ground rent clauses, but the majority of developers fix a fair and reasonable ground rent for a significant period, reviewing them approximately every 10 years with increases often linked to RPI. Many developers are now feeling that they are all being punished for the sins of the few. The consultation proposals will have to be considered to prevent developers from being unfairly hit by the changes.
The consultation closes at 11:45pm on 19 September 2017 and you can make responses here.
Michelmores recommends that both developers and homeowners make responses so that all views can be taken into consideration. If you have any queries about ground rents or would like us to review your leases, please contact Emma Honey, head of Real Estate at Michelmores.