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Are peppercorn ground rents the future?

Last year the Government launched a consultation on ground rents for new leasehold properties. This year the Government has provided further clarification on the proposed reforms.

The Government has specified its intention to legislate to restrict the amount of ground rent payable in relation to new leases of flats and houses (where applicable) to a peppercorn (£0). Previously, the Government consultation paper had proposed capping ground rents a £10 per year. There will be exceptions such as retirement and community properties and mixed use schemes.

The proposals will not prevent landlords from continuing to collect ground rent under existing leases. However, the proposed legislation would apply once the leasehold property was assigned or the lease renewed or extended in most circumstances. If a tenant has paid ground rent when they should not have, they should be able to recover the full amount.

If a landlord continues to charge ground rent once the proposed legislation applies, they could be liable to a fine of up to £5,000.

Top Tip: There have been a lot of proposed changes to Landlord and Tenant law recently, so be aware of any ground rent provisions in your leases and ensure these are legally compliant.

For advice on Commercial Property matters, please contact Chris Sykes Head of Commercial Property.