You may have read about the problem many times. People buying new leasehold properties then being caught by ground rents being increased each year at extortionate levels with no way to amend the lease unless via a Leasehold Tribunal hearing.
On Monday, the Leasehold Reform Bill passed its first reading in the House of Commons with MPs voting to ‘beef up’ the rights of leaseholders. One key section of the Bill is that for all new leasehold purchases, the freeholder will only be able to charge one ‘peppercorn’ per year as ground rent.
In practice, this will mean the new leaseholder will literally only have to pay one peppercorn in ground rent each year.
What is a Peppercorn rent?
In the 16th, 17th and 18th centuries, spices were valuable. That said, the practice eveloved where freeholders regularly agreed to only accept a peppercorn as rent as just one corn was not worth anything.
It is thought today that freeholders will literally waive the peppercorn rent and only take control of the land again when the lease expire, which could be anything from 125 years to 999 years.
Long overdue. That said, there are still thousands of leaseholders that will still be shackled by their existing leases but given this move, we cannot see it being long before further legislation is introduced to allow existing leaseholders easier routes to amend or extend their leases without the huge costs.