The government has scrapped the plan to cut ground rents to peppercorn rent, as confirmed by Housing Secretary Michael Gove. This decision follows concerns over the possibility of legal challenges due to the retrospective alteration of property rights. The Treasury also cautioned that such actions could lead to a loss of £15-40 billion in investments, potentially harming pension funds that are significant contributors to the housing market.
London Mayor Sadiq Khan criticized the decision, citing the need for Gove to explain why the government isn’t following through on its manifesto promise to limit ground rents to peppercorns. He also emphasized the urgency for a major overhaul of the leasehold system, advocating for commonhold to become the standard. Angela Rayner, the shadow levelling-up secretary, accused the government of indecisiveness and breaking another manifesto pledge, highlighting that this reflects poorly on Prime Minister Rishi Sunak’s leadership.
Last year, Gove expressed his desire to eliminate leaseholds entirely, facing opposition from the Prime Minister. The resulting leasehold reform bill in November aimed to lower the cost of purchasing property freeholds to gradually phase out leaseholds.
Industry professionals from the Association of Leasehold Enfranchisement Practitioners, who specialize in leasehold enfranchisement, support the government’s cautious approach. Mark Chick of Bishop & Sewell LLP and a director of ALEP regarded the news as a sensible decision, noting that outright banning leaseholds was generally not favoured. He anticipates the government’s official response to the consultation on leaseholds, which may still include measures like a potential £250 cap on ground rents.
Clive Scrivener of Scrivener Tibbatts praised the logical thinking within the Treasury and Downing Street. He explained that legally established rights have allowed leaseholders to significantly reduce ground rents for over thirty years. Scrivener reminded buyers that they are made aware of their leasehold obligations, including ground rent, by their conveyancing solicitors upon purchase.
