Many people will have seen the rumour/ announcement in yesterday‘s Sunday Times
The Times / Sunday Times do have a good record of being an unofficial / official source of these things – after all that is where details of the Leasehold and Freehold Reform BIll first appeared in November of last year.
If this is right then it may well be that the recommended outcome of the DLUHC consultation on ground rent may not be the banning of ground rent for all existing leases.
Stepping back from this, is this actually a surprise ? After all a total ban was only one of the options for reform that the consultation sought views on.
To many commentators this won’t be that much of a surprise given the noted potential issues with the possible need to pay compensation – highlighted by various human rights experts and also the question of interference in existing contracts.
Outside of some of the more political comments, there has been a ban on ground rent for all new leases following the Leasehold Reform (Ground Rent) Act 2022.
What the article does not make clear is which of the other options for reform are still on the table – don’t forget the consultation mentioned a 0.1 % (or higher cap) a freeze and also a cap at £250 for all current ground rent as an option. Mr Gove’s team are still lobbying for the £250 cap apparently.
This would be a significant step forward for all leaseholders – what I am not clear about is why one of the options for reform as not a more surgical strike on ‘bad’ ground rents (the high doubling rents, or the ones like the one the article mentions) – and these alone as a first step.
There are other possible options too – like a phased in ban or reduction – giving the market time to adjust. These were not mentioned in the Consultation but were among the suggestions made by respondents to it.
What the official outcome of the Consultation will be – we do not yet know – but it does seem that an outright ban may not be on the cards.
The question then is what recommendation(s) will the consultation make? Betting money might be on a cap at a fraction of capital value – especially given that the draft bill uses a 0.1% cap in its valuation model. However, we will have to wait and see …
Mark Chick
25th March 2024
Michael Gove actually stated in Parliament, I think during the first reading, that he wanted to make ground rents a peppercorn, and from his body language and the words he used, he seemed pretty determined. My interpretation was that the consultation was a sham and that his plans would be introduced, regardless of the representations. So, yes it was only one of the options, but MG very much tied his colours to it’s mast!