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May 8

Proposals for Ground Rent Cap

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Michael Gove’s proposed abolition of leasehold has encountered a compromise, as plans now entail capping ground rents at £250 annually. This development signals a partial victory for Gove, despite initial resistance from the Treasury. Rishi Sunak’s decision to overrule objections underscores the government’s commitment to addressing the challenges faced by leaseholders, who have long grappled with escalating ground rents.

The forthcoming announcement of this decision aims to provide relief to leaseholders burdened by the uncertainty and financial strain caused by escalating ground rents. However, the phased approach to phasing out ground rents over a period of two decades may leave some feeling dissatisfied. Despite this, Downing Street asserts that this compromise reflects the Conservative manifesto’s commitment to reducing ground rents to a nominal rate, albeit with an elongated timeline.

This compromise is expected to be enshrined in the ongoing parliamentary scrutiny of the Leasehold and Freehold Reform Bill. Mark Chick, Partner at Bishop & Sewell LLP and a director of ALEP (Association of Leasehold Enfranchisement Practitioners), acknowledges the significance of this proposal but suggests that it may fall short of addressing all concerns. Chick emphasizes that some stakeholders may argue for a complete ban on ground rents to provide more comprehensive relief to leaseholders.

The proposal to cap ground rents at £250 reflects a nuanced consideration of human rights and financial implications, likely aiming to mitigate substantial compensation claims that could arise from a complete ban. While some may perceive the fixed cap as arbitrary and not reflective of property values, it’s plausible that concerns about dispute resolution costs and delays influenced this decision.

For freeholders, the £250 cap may offer a more favorable outcome than an outright ban, though questions linger about potential regional variations and the timeline for phasing out ground rents. Government efforts appear focused on striking a balance between respecting property rights and addressing leaseholders’ concerns, emphasizing the need for a measured approach to reform. Clarification on these aspects awaits the formal outcome of the consultation process.

Propertymark welcomes the amended proposals, particularly the inclusion of ongoing reviews regarding tenancy measures and a commitment to providing annual parliamentary updates on the private rented sector’s health. Timothy Douglas, Head of Policy and Campaigns at Propertymark, emphasizes the necessity for agents to be legally required to be fully qualified and operate within a framework ensuring consumer protection.

Throughout the Bill’s progression, Propertymark has advocated for the retention of fixed-term tenancies and improvements to the court system to support the abolition of Section 21. While these amendments indicate Ministerial responsiveness to concerns, clarity is still needed in certain areas. Propertymark remains engaged with officials at DLUHC, the Minister, and Parliamentarians as the Bill advances to its next stage.

 

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Tags

ALEP (Association of Leasehold Enfranchisement Practitioners), Proposals for Ground Rent Cap


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