Ground rent charges set to be banned under new law

A new law is set to come in on 30 June banning ground rent charges on the majority of new leases in England and Wales.

Future homebuyers will no longer need to pay annual costs to the freeholder or landowner for the land their home is on, reducing overall property bills. 

Before this freeholders could decide how much ground rent to charge, which resulted in costs regularly increasing, reaching hundreds of pounds each year with no clear service in return. 

The Department for Levelling Up, Housing and Communities hopes the ban will help homeowners to cope as the cost of living increases and will lead to fairer, more transparent homeownership. 

In preparation of the Leasehold Reform Act coming into force, landlords have begun to reduce ground rent charges to zero for homebuyers looking to start a new lease with them. 

Leasehold Minister, Lord Stephen Greenhalgh, said: ‘This is an important milestone in our work to fix the leasehold system and to level up home ownership.

‘Abolishing these unreasonable costs will make the dream of home ownership a more affordable reality for the next generation of home buyers.

‘I welcome the move from many landlords who have already set ground rent on their new leases to zero and I urge others to follow suit ahead of this becoming law.’ 

Existing leaseholders have also secured a reduction in their inflated ground rent costs, as the Competition Market Authority (CMA) have made an agreement with major homebuilders to stop them from doubling ground rent charges every year. 

The new law is part of a reform package to address problems within the housing system. 

Further measures due to come in include a new right for leaseholders to extend their leases to 990 years at zero ground rent and an online calculator to help them find out how much it would cost to buy the property or extend their lease.

Photo by Maximillian Conacher.