MPs demand scrapping of ground rents on leasehold properties

Sky News is reporting that up to 30 Conservative MPs are threatening to rebel against the government’s approach to ground rents on leasehold properties.

In a letter to Chancellor Jeremy Hunt, the MPs remind Hunt that the Conservatives’ 2019 manifesto advocated a peppercorn system, where ground rent is as close to zero as possible.

Currently, there is no cap on the amount freeholders can charge existing leaseholders for ground rent. 

Sky has seen the MPs’ letter in which they write: "It's time to finish what Margaret Thatcher started and implement peppercorn ground rents and other much needed reforms to leasehold."

They also state that many of their constituents are stretched with the cost of living and that MPs have seen the "human misery and financial stress" the "feudal" system of leasehold supports. The letter says the reforms to leaseholds they want to see are crucial to upholding classic Tory aspirations of creating a "property owning democracy".

Housing Secretary Michael Gove has in the past described leasehold as a "feudal system" and there have been repeated promises by former government ministers to scrap the system.

However the Pensioners for Ground Rent Association - an investors' group - is against any cap and says: “We are only now hearing through the media what the Government is thinking, not through Parliament, but the pages of the press. Only last week we heard it intends to cap ground rents at £250 pa, reducing to zero over a 20-year sunset clause.

“We believe any form of cap on ground rent is an interference in UK contract law, however we note a precedent sunset clause of 60 years from the Rentcharges Act 1977. Even that would be financially problematic for institutions who have provided 70+ years of financing terms on ground rent portfolios due to the secure long-term nature of the lease contracts.” 

Members of the House of Lords are currently discussing details of the Leasehold and Freehold Reform Bill.

The Bill’s main provisions would:

- make it cheaper and easier for leaseholders in houses and flats to extend their lease and buy the freehold;

- increase the standard lease extension term to 990 years, with ground rent reduced to a peppercorn (zero financial value), upon payment of a premium;

- change the qualifying criteria to give more leaseholders the right to extend their lease, buy their freehold and take over management of their building;

- ban the granting of new leasehold houses (with some exceptions);

- improve the transparency of service charges and ensure leaseholders receive key information on a regular basis;

- give leaseholders a new right to request information about service charges and the management of their building;

- improve the transparency of administration charges and buildings insurance commissions;

- ensure leaseholders are not subject to any unjustified legal costs and can claim their own legal costs from their freeholder;

- give freehold homeowners who pay charges for maintenance of communal areas the right to 1) challenge the reasonableness of charges and  standard of services provided; and 2) apply to the tribunal to appoint a substitute manager where their estate management company is failing;

- improve the transparency of estate charges and give freehold homeowners access to redress schemes;

- ensure that relevant property sales information is provided to leaseholders and freeholders on estates in a timely manner;

- strengthen the leaseholder protections in the Building Safety Act 2022.