Ground rent should be set at a peppercorn value, Propertymark argues

Propertymark has responded to the UK Government’s consultation on ‘Modern leasehold: restricting ground rent for existing leases’ arguing that setting ground rent at a peppercorn value will lead to a fairer leasehold system.

Following the King’s Speech in November 2023, the UK Government set out plans to reform the leasehold system in England and Wales and this consultation forms part of the process. In June 2022, the Leasehold Reform (Ground Rent) Act came into force putting an end to ground rents for most new long residential leasehold properties in England and Wales.

In Propertymark’s response to the consultation, the professional body for property agents argued that the advantages of a peppercorn cap for leaseholders include:

Existing leaseholders will not have to pay an annual fee for no guaranteed service.
It will be easier for leaseholders to sell their property.
It will reduce the cost of living in a leasehold property as often ground rents are changed alongside annual service charges, estate charges or additional administration charges.
The reforms to ground rent sit alongside other proposed measures from the UK Government such as proposals to increase the standard lease extension term for leaseholds to 990 years from 90 years which is likely to mean that leaseholders could be thousands of pounds better off, and the value of their property could increase.

Research from Propertymark in 2018 Leasehold: A Life Sentence? uncovered that 70% of leaseholders were worried that they will not be able to sell their homes because they are leasehold. This continues to be the case, if not worse due to growing awareness of leasehold practices, as the organisations’ 2023 research Has anything changed? showed that 78% of Propertymark agents reported that leasehold properties with escalating ground rent will struggle to sell, even if priced correctly.

Commenting, Timothy Douglas, Head of Policy and Campaigns at Propertymark, said:

“Out of the options provided by the UK Government, setting ground rents at a peppercorn value is the only real way to create a level playing field between existing and new leaseholders. Action must be taken through legislation as we know from Propertymark member agents that leasehold properties with escalating ground rent are harder to sell. Additionally, the UK Government need to ensure that property professionals can better identify freeholders so they can support consumers with their lease and these proposals can be enforced.”