Regulated and Unregulated Long Residential tenancies

The Leasehold Reform (Ground Rent) Bill received Royal Assent on 8 February 2022. The provisions in the Act do not come into force until 30 June 2022 and create a two-tier system for residential leases.  

The Prohibition

The Act creates a new category of residential lease. A Regulated lease which is any residential lease granted for a premium on or after the 30 June 2022 will not be able to retain a ground rent in favour of the Freeholder or other party to the lease. 

The new regulated lease can only charge a ground rent of a peppercorn per year.  There are further prohibitions in that Act and it is not possible to have an administration charge for the peppercorn rent.

The Act applies to regulated leases which is:

• A residential lease;

• Granted for term of the lease 21 years or more; and

• In return for a premium

All existing ground rents, no matter what mechanism they utilise, are not affected.  These are unregulated leases and subject to existing rules as to extinguishing the ground rent.

The Exemption

Any lease entered into on or after 30 June 2022 which was subject to a contact entered into prior to that date will be exempt. 

All leases that have been extended under the Leasehold Reform Act 1967 (for houses) and the Leasehold Housing and Urban Development 1993 ( for flats) will be an excepted lease.  Any voluntary lease extension will also be caught by the 2022 Act and other situation where there is a deemed surrender and regrant.

Sanctions

There are sanctions for non-compliance which are enforceable against both the landlord and their agent who request a payment of a prohibited rent or receive the same and fails to return it to the tenant within 28 days after receipt could be fined up to £30,000.

If you have a unregulated lease which reserves a ground rent which you wish to extinguish by obtaining a 1993 Act lease extension please contact us on disputes@leedsday.co.uk