The government’s ban on charging ground rent on leases in England and Wales comes into force today. 

Only a peppercorn ground rent is now considered legal on new residential leases established from today. 

The new provisions apply where a lease is granted on or after today, June 30 2022, if it is a long lease exceeding 21 years for a single dwelling, and if it was granted for a premium – but this includes where a lease has been changed by a ‘deemed surrender and regrant’ and no premium was required.

The new provisions do not apply if the lease is not regulated, nor for transactions when the exchange of contracts for a lease (other than an option or right of first refusal) was before today’s date. 

It also does not apply for leases that are for community-led housing or on business leases, nor on shared ownership leases where rent is payable on the landlord’s owned share and the peppercorn rent limit applies to the leaseholder’s owned share.

In addition to ground rents being restricted to a peppercorn for those affected properties, the new legislation also bans landlords from charging for the collection of the peppercorn rent. There is no obligation to actually collect a peppercorn from leaseholders.

Statutory lease extensions for flats must already be granted at a peppercorn, and statutory lease extensions for houses remain unchanged. Enforcement of the new provisions will be by councils, which have the power to order any prohibited ground rent to be repaid.

The government has issued new guidance here for leaseholders, freeholders and agents.