The government’s ban on charging ground rent on new leases in England and Wales comes into force on June 30th. It means that future homebuyers will not be facing arbitrary and escalating bills, that they often knew little about when buying.

The government has taken action in a bid to rid future homeowners of these annual costs – known as ground rent. Sometimes worth hundreds of pounds a year, these charges provide no clear service in return and can be set to escalate regularly, with a significant financial burden for leaseholders.

From 30 June 2022, anyone buying a home on a new long lease will now be freed from these annual costs, helping homeowners manage their bills as they face the cost of living crisis.

Landlords will be banned from charging them, under a new law that will lead to fairer, more transparent homeownership for thousands of homebuyers and homeowners.

In preparation, many landlords have already reduced ground rent to zero for homebuyers starting a new lease with them. Anyone preparing to sign a new lease on a home in the next two months should speak to their landlord to ensure their ground rent rate reflects the upcoming changes.

Leasehold Minister, Lord Stephen Greenhalgh said: “This is an important milestone in our work to fix the leasehold system and to level up home-ownership. Abolishing these unreasonable costs will make the dream of home ownership a more affordable reality for the next generation of home buyers. I welcome the move from many landlords who have already set ground rent on their new leases to zero and I urge others to follow suit ahead of this becoming law.

The move forms the first part of the government’s reform package that will make homeownership cheaper, fairer and more secure.”

Future measures, announced last year, include a new right for leaseholders to extend their leases to 990 years at zero ground rent and an online calculator to help leaseholders find out how much it would cost to buy their freehold or extend their lease.

In addition, thousands of existing leaseholders have also already seen a reduction in their inflated ground rent costs. In a government crackdown, the Competition Market Authority (CMA) secured commitments with major homebuilders to stop doubling ground charges every year for leaseholders.

The ban on landlords charging ground rent on new residential leases, announced today, will also apply to retirement homes. This will come into force no earlier than 1 April 2023 and more details will be confirmed in due course.

Research showed that:

• 62% of respondents felt they were mis-sold their leasehold property.
• 93% wouldn’t purchase another leasehold property.
• 57% didn’t understand what being a ‘leaseholder’ meant until they had already purchased the property.
• 48% were unaware of the escalating ground rent until it was too late.
• Around 1.4 million homeowners in England own their houses through a leasehold.
• 1,100 leaseholders were surveyed as part of the research.