The Leasehold and Freehold Reform Bill in relation to Ground Rents

On Sunday 21 April, the Sunday Times reported an imminent watering down of the Leasehold and Freehold Reform Bill in relation to ground rents.

This is ALEP’s immediate response which has since been reported by Property Week and Solicitors’ Journal.

‘Some will say that this proposal does not go far enough, and that Government should be aiming for a complete ban on ground rents. However, it seems very clear that the human rights considerations have been taken into account and the realisation that a complete ban would more likely than not to lead to significant compensation claims. The government no doubt wants to avoid having to pay a reported £27.3 billion to compensate freeholders for lost assets.

It may well be that some will consider that £250 is perhaps an unfair figure when applied across the board – and that it does not reflect relative values whereas perhaps a 0.1% (or other percentage) cap relative to value might. If the cap at £250 is right, one can only assume that government has been swayed by the suggestion that resolving disputes about the fraction of value might cause cost and delay.

However, for freeholders this is perhaps better news than an outright ban. I wonder whether there will be any differential between central London and elsewhere? Also, the Sunday Times article suggests that there will be a phasing out over time. How long will this be? Will there be a reduction down to zero? Either would have a significant impact on the long-term value of freeholds. Government has clearly undertaken a balancing act between the human rights considerations of ‘deprivation’ and ‘control’ of property in seeking to find a balanced solution. We will have to wait for the formal outcome of the consultation to know what the true position is.’

Mark Chick
ALEP Director 
Monday 22 April 2024