New rules are coming into force later this year for anyone looking to buy a home in England and Wales. Under a new government law, future homebuyers are set to be freed from paying expensive ground rent bills, which will help to reduce some of the costs that come with buying a home.
Landlords will be banned from charging ground rent on most new residential leases from June 30 as part of the government's reform package pledged to create a fairer housing system and level up opportunities for more people. They say it will 'make home ownership more for the next generation of homebuyers'.
The ban will put an end to increasing annual ground rent costs which will reduce prospective property bills for any homebuyers purchasing a home later this year.
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The government says it is taking action to rid future homeowners of annual charges known as ground rent, which can often cost hundreds of pounds a year. These charges provide no clear service in return and can escalate regularly, with a significant financial burden for leaseholders.
From 30 June 2022, anyone buying a home on a new long lease will now be freed of these annual costs. The new law aims to lead to a 'fairer, more transparent homeownership for thousands of homebuyers', according to the Department for Levelling Up, Housing and Communities.
In preparation for the new rules, many landlords have already reduced ground rent to zero for homebuyers starting a new lease with them. Anyone preparing to sign a new lease on a home in the next two months should speak to their landlord to ensure their ground rent rate reflects the upcoming changes.
Leasehold Minister, Lord Stephen Greenhalgh, said: "This is an important milestone in our work to fix the leasehold system and to level up home ownership. Abolishing these unreasonable costs will make the dream of home ownership a more affordable reality.
"I welcome the move from many landlords who have already set ground rent on their new leases to zero and I urge others to follow suit ahead of this becoming law."
The move forms the first part of the government’s reform package that they say will make homeownership cheaper, fairer and more secure. Future measures, announced last year, include a new right for leaseholders to extend their leases to 990 years at zero ground rent and an online calculator to help leaseholders find out how much it would cost to buy their freehold or extend their lease.
In addition, thousands of existing leaseholders have also already seen a reduction in their inflated ground rent costs. In a government crackdown, the Competition Market Authority (CMA) secured commitments with major homebuilders to stop doubling ground charges every year for leaseholders.
Those who own properties with Aviva, Persimmon, Countryside Properties, Taylor Wimpey and others will see their ground rent returned to the rate it was when they first bought their home. The CMA’s investigation is continuing into Barratt Developments, Brigante Properties and the investment group Abacus Land and Adriatic Land.
The ban on landlords charging ground rent on new residential leases will also apply to retirement homes. This will come into force no earlier than 1 April 2023 and more details will be confirmed in due course.
