Propertymark, the professional body for property agents, has submitted its response to the UK Government’s consultation on ‘Modern leasehold: restricting ground rent for existing leases’, advocating for the implementation of a peppercorn ground rent value.
This proposal comes in the wake of the UK Government’s plans to reform the leasehold system in England and Wales, outlined following the King’s Speech in November 2023.
The Leasehold Reform (Ground Rent) Act, which became effective in June 2022, has already ceased ground rents for most new long residential leasehold properties in England and Wales. Propertymark’s recommendation for a peppercorn cap aims to extend similar benefits to existing leaseholders.
The advantages outlined by Propertymark include the elimination of annual fees without guaranteed service for existing leaseholders, easier property sales, and reduced living costs in leasehold properties, as ground rents often coincide with annual service charges and other administrative fees.
These proposed reforms to ground rent are part of a broader set of measures by the UK Government, including increasing the standard lease extension term for leaseholds to 990 years from 90 years. This change could potentially save leaseholders thousands of pounds and increase property values.
Propertymark’s research, including the 2018 study ‘Leasehold: A Life Sentence?’ and the 2023 report ‘Has anything changed?’, indicates growing concerns among leaseholders about the saleability of their properties due to leasehold practices. Their latest research shows that 78% of Propertymark agents report difficulty in selling leasehold properties with escalating ground rent, even when priced correctly.
Timothy Douglas, head of policy and campaigns at Propertymark, said: “Out of the options provided by the UK Government, setting ground rents at a peppercorn value is the only real way to create a level playing field between existing and new leaseholders.
“Action must be taken through legislation as we know from Propertymark member agents that leasehold properties with escalating ground rent are harder to sell.
“Additionally, the UK Government needs to ensure that property professionals can better identify freeholders so they can support consumers with their lease and these proposals can be enforced.”
