The Leasehold Reform (Ground Rent) Act 2022, which comes into effect at the end of June, introduces changes that affect property purchases involving leasehold dwellings. If you represent buyers or landlords, you should be aware of the upcoming changes. These include:
- If any ground rent is demanded as part of a regulated new residential long lease, it cannot be for more than one literal peppercorn per year. In effect, most future residential leaseholders will not face financial demands for ground rent.
- The updated Act bans Landlords from charging administration fees for collecting a peppercorn rent, closing a possible loophole where a landlord could try to make a monetary charge via another route.
- Landlords who require payment of ground rent in contravention of the Act will face penalties of between £500 and £30,000 enforced by way of a civil penalty regime.
- For existing leaseholders entering into voluntary lease extensions after commencement, the extended portion of their lease will be reduced to a peppercorn.
Further details will follow in due course regarding regulations to specify the form and content of written notices that are required to be exchanged by the landlord and tenant to qualify for the business lease exception. Statutory lease extensions for both houses and flats remain unchanged and are therefore exempt from the provisions of the Bill.
Read the full Leasehold Reform (Ground Rent) Act 2022 for further information.
At the start of the year, the SRA published guidance on what Standards and Regulations are required when acting for clients who are buying leasehold properties to avoid possible breaches of the requirements. You can read our previous post, which discussed these guidelines in more detail:
The guidance reminds firms that where the regulator receives complaints about a failure to advise appropriately on lease clauses, they will apply their enforcement strategy. Generally, rather than penalising a single negligent act or an omission, the SRA will be focusing on cases “where there is evidence of seriously or persistently poor levels of competence demonstrating a pattern of behaviour; an example of which might be an overly mechanical ‘copy-and-paste’ approach to advising”.
However, the SRA stressed that single cases could attract action too, particularly “where a firm or an individual has knowingly acted outside their competence or has failed to take reasonable steps to update their knowledge and skills, or those of their employees.”
Effective Risk Management and Control – Solutions & Actions
The Strategic Partner is a law firm knowledge hub. We work with both law firms and professional indemnity insurers, advising and guiding on risk management techniques to assist and reduce instances of claims or regulatory breaches.
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