The move follows concerns that leaseholders are being charged exorbitant ground rents
UK MPs have backed setting the cost of ground rents on new houses in England and Wales at ‘one peppercorn’ a year. The government-sponsored plan, if it becomes law, will effectively leave owners who buy only leases, instead of freeholds, paying nothing.
The move follows concerns that leaseholders are being charged exorbitant, fast-rising ground rents.
But Labour says ministers need to go further and completely ban the selling of houses without a freehold.
The Leasehold Reform Bill passed its first stage in the Commons unopposed on Monday.
The bill has already been passed by the House of Lords. It will now undergo further scrutiny by MPs before it can become law.
It is relatively normal for someone buying part of a shared building to own just a leasehold, lasting up to 999 years. Someone else owns the freehold – the property as a whole and the land on which it is built. In this situation, the leaseholder pays ground rent to the freeholder.
But, according to research from 2018 by Propertymark, the arrangement is increasingly being applied to people purchasing new-build houses. Many buyers claim they have been mis-sold a leasehold by a developer.
In 2018 the government consulted on capping ground rent on leasehold houses at £10 a year, but the Leasehold Reform Bill stipulates setting the annual rate at ‘one peppercorn’.
Housing Minister Eddie Hughes told the House of Commons that the system had become ‘a nightmare for some’ new-house buyers.
Regardless of whether the ground rent is a nominal peppercorn or thousands of pounds, the fundamental issue is that no meaningful service is provided in return, he added.
