Scrappage of Ground Rents Would Be ‘Slow-Mo Death Blow’ to Leasehold Regime, Campaigner Says

Residential flats and apartments are pictured in Woolwich, south east London on Sept. 29, 2023. Daniel Leal/AFP via Getty Images

A campaigner has hailed the potential abolishment of ground rents for existing leasehold properties as a “slow-mo death blow” of the “antiquated and iniquitous leasehold regime” in England and Wales.

The effective scrappage of ground rents is among the options listed in the government’s consultation launched on Friday to slash the charge, which it says can “result in spiralling payments” for leasehold homeowners and cause problems for those who want to sell their properties.

Under the proposals, ground rents can either be limited to the token cost of a “peppercorn,” which is effectively zero, or capped in a number of ways.

It’s part of the government’s broader plan to reform the leasehold system, which Housing Secretary Michael Gove said is “an outdated feudal system that needs to go.”

Leaseholders are homeowners who don’t own the land on which their homes are built on and have a tenant-landlord relationship with the landowners, who are called freeholders.

Leaseholders have complained about crippling and often opaque charges as well as the lack of control in the management of their properties, particularly in recent years with the growth of absentee and offshore freeholders.

The issues also came into sharp focus in the wake of the deadly Grenfell Tower fire in 2017 in a tug of war on who should pay to replace combustible cladding in buildings.

The problems have also created difficulties for leaseholders to sell the homes.

According to the latest estimates by the Department for Levelling Up, Housing and Communities (DLUHC) there are around 4.98 million leasehold homes in England, accounting for around a fifth of England’s housing stock.

In London, more than a third (36 percent) of the housing stock are leasehold properties.

Ground rent, which is part of the costs leaseholders have to pay, have already been abolished for most new leases from June 30, 2022, and for leases of retirement homes from April 1 this year.

On Friday, the DLUHC launched a consultation on what to do with ground rents on existing leases.

Five options are being considered, including setting ground rents at the value of a peppercorn, capping them at a certain amount or a certain percentage of a property’s value, freezing them at current levels, or limiting them to the original amount when the lease was granted.

According to Homeowners Alliance, leases are “often 90 years or 120 years and as high as 999 years” long but can also be “short, such as 40 years.”

Commenting on the possible capping of ground rents at a peppercorn, Harry Scoffin, co-founder of campaign group Commonhold Now said in an email to The Epoch Times, “Scrapping ground rents on existing leases would be the ‘slow-mo death blow’ of the antiquated and iniquitous leasehold regime in England and Wales.

“Ground rent is pure profit to the owner of the freehold, the entity owning and controlling other people’s homes and their chequebooks. It is not for the upkeep or maintenance of a block of flats. It is for no defined benefit or service. Ground rent is inherently illegitimate and has no place in a modern economy or housing market,” he said.

Commonhold Now advocates for a commonhold system, in which flat owners in an apartment block can collectively buy the freehold so they can own their properties and a share of the common areas.

Mr. Scoffin said scrapping the charge on existing leases would mean the costs for leaseholders to “buy their freedom” or to extend leases are “radically shrunk.”

“It would also act as helicopter money to the millions suffering from these charges in a cost of living crisis,” he said.

Mr. Scoffin disputed the argument that the government cannot tamper with existing contracts without compensating freeholders, saying “legislation has already diminished the interest of the tobacco and oil industries without compensation.”