Plan Insurance Blog

Ground Rents Won’t Be Scrapped

In a bid to strike a balance between leaseholders’ rights and financial considerations, the Leasehold and Freehold Reform Bill is undergoing significant amendments, signalling a compromise between policymakers and stakeholders. While the initial aim to abolish ground rents entirely has been diluted, there are still notable victories for leaseholders in the proposed changes.

Under the revised plan, leaseholders will continue to pay ground rent for up to 20 years, albeit at a capped rate of £250 annually. This compromise aims to alleviate the financial burden on leaseholders while also addressing concerns raised by the Treasury regarding potential losses for investors.

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Michael Gove’s ambitious goal of phasing out ground rents entirely faced staunch opposition, particularly from pension and insurance funds heavily invested in ground-rent portfolios. Gove outlined his desire to abolish leasehold, describing it as a “feudal system that needs to go”. However, an internal Treasury analysis estimated that £37 billion of investment could be wiped out. The compromise reflects a delicate balancing act between competing interests, with the prime minister eventually intervening to ensure a resolution.

Compromise Reached in Leasehold Reforms

While some may view the compromise as falling short of the initial vision, it represents a step towards fulfilling the 2019 Tory manifesto commitment to reduce ground rents to a peppercorn rate. By incorporating these changes into the Leasehold and Freehold Reform Bill, the government aims to deliver tangible reforms that align with the interests of leaseholders and homeowners.

Harry Scoffin, founder of the anti-leasehold campaign group Free Leaseholders, acknowledges the progress made but calls for further enhancements to honour the Conservatives’ manifesto pledge. The proposed amendments signal a shift towards prioritising the welfare of leaseholders and homeowners.

As the details are finalised and the reforms are incorporated into law, the government remains committed to ensuring fair and equitable treatment for leaseholders across England and Wales. With ongoing consultations and legislative updates, the journey towards comprehensive leasehold reforms continues, guided by a commitment to empowering homeowners and safeguarding their rights.

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