A cross-party committee of MPs is urging the government to expedite the implementation of a £250 cap on leasehold ground rents, stating that leaseholders have waited too long for meaningful reform. The Housing, Communities and Local Government Committee has voiced its concern over the slow pace of change, despite repeated promises from successive governments to tackle the issues plaguing the leasehold system.
Leasehold ownership, particularly common in flats but also affecting a growing number of new-build houses, grants ownership of a property for a fixed period, but the land it sits on is owned by a freeholder. Leaseholders often face escalating ground rents, which can be fixed, reviewed periodically, or even double every few years, leading to significant financial burdens and making properties difficult to sell. These charges are in addition to service charges for the maintenance of communal areas.
The proposed £250 cap on ground rents is a key component of the government's broader leasehold reform agenda, which also includes making it easier and cheaper for leaseholders to buy their freehold or extend their lease. While the Leasehold Reform (Ground Rent) Act 2022 abolished ground rents for most new residential long leases in England and Wales, it did not retrospectively address existing leases, leaving many current leaseholders still exposed to high and escalating charges.
The committee's intervention underscores the ongoing frustration among leaseholders and housing campaigners who argue that the current system is exploitative. They highlight instances where ground rents have made properties virtually unsellable, leaving owners trapped. The government has previously acknowledged the need for reform, with various proposals put forward over recent years, but the actual implementation of comprehensive changes has been slow.
The call for speedier action comes amidst a challenging period for the UK property market. While house prices have shown some recent resilience, for example, Rightmove reported a 0.8% increase in average asking prices in May, reaching a new record high of £375,131, affordability remains a significant concern, particularly for first-time buyers. High mortgage rates, with the average two-year fixed rate currently around 5.91% and five-year fixed rate at 5.46% according to Moneyfacts, compound the financial pressures on homeowners and prospective buyers alike. For leaseholders, the added burden of uncapped ground rents can make an already difficult financial landscape even more precarious.
The implications of the current leasehold system extend to landlords and existing homeowners. Landlords with leasehold properties face similar ground rent issues, which can impact their rental yields and the attractiveness of their investments. Existing homeowners with leasehold properties may find their property values suppressed and face difficulties when trying to remortgage or sell, as lenders can be reluctant to lend on properties with onerous lease terms.