Overview of the Bill
1 Through this Bill the Government aims to make leasehold ownership fairer and more affordable for leaseholders by ensuring that freeholders/landlords will no longer be able to make financial demands for ground rent. The Bill also prohibits the charging of administration charges in relation to peppercorn rents.
2 This Bill seeks to achieve the above by restricting ground rents on newly established long residential leases of houses and flats to a token one peppercorn per year, effectively restricting ground rents to zero financial value. There is no obligation on a landlord to levy a peppercorn rent and it is not envisaged that landlords will request their tenants pay a peppercorn as a rent in practice.
3 A ground rent is a payment specified in the lease that the leaseholder is required to make to the landlord (directly or indirectly through an agent or representative) without obligation on the landlord (or person acting on behalf of the landlord) to provide a clear service in return to the leaseholder.
4 The Bill defines a peppercorn rent as an annual rent of one peppercorn.
5 Note: In the following sections of these Explanatory Notes, unless otherwise stated, the terms "leaseholder" and "tenant" refer to the person who currently owns the leasehold interest in the property. The term "landlord" refers to the person who is the immediate landlord of that person (either the freeholder or another leaseholder with a superior interest in the property).
6 The Bill places a duty on trading standards authorities in England and Wales to enforce the Bill. District Councils that are not trading standards authorities will have power to enforce in England if they choose to do so. This Bill also makes provision for leaseholders to recover unlawfully charged ground rents through the First-tier Tribunal.
7 A breach of the ground rent restrictions is a civil offence with a financial penalty of between £500 and £5,000. Local authorities will be able to retain the money raised through financial penalties with this money reserved for covering the cost of enforcement in relation to residential leasehold property.
8 The Bill applies to newly established long residential leases. The Bill makes exceptions for a small number of types of leases: business leases, statutory lease extensions of houses and flats, community led housing and home finance plan leases (either a type of equity release financial product known as a Home Reversion Plan or a rent to buy arrangement). Rent may continue to be charged on the landlord’s share of shared ownership leases, and where it is agreed on leases replacing pre-commencement leases on the remaining term of the pre-commencement lease (known as voluntary lease extensions).