What can we expect following the ban on charging ground rent?

In April, the Government announced that from the end of June, landlords will be banned from charging ground rents to future leaseholders and those that are caught ignoring these new rules could be fined between £500 and £30,000.

It’s the clarity that the industry has been seeking for a long time and is welcomed news by leaseholders, particularly after a long period of uncertainty.

Whilst this is positive news overall, there are still some factors that leaseholders need to be mindful of. Leaseholders will be saving money, but at what cost? By taking away the ground rent, the guarantee of the building’s upkeep and maintenance is also being take away.

Following on from the tragedy of Grenfell, we all understand the impact and importance of adhering to health and safety policies more than ever before. With the removal of the ground rent, and somebody in the position of ensuring buildings are following the ever-changing health and safety policies, we run the risk of buildings not being maintained to the correct standards, potentially putting lives at risk. The cladding crisis is a prime example of the importance of a knowledge management company.

At present, ground rent owners have an incentive to manage the buildings and with ground rent being banned, responsibilities will fall to the leaseholders. The concern around this is that the correct policies and procedures will not be followed which could lead to a chaotic situation as well as a blame game.

A fair contribution, be that monthly, or yearly of 0.1% charge to guarantee the legal protection, security, and peace of mind that a professional third party is looking after the building is a better option. This is a small price for leaseholders to pay in comparison to the amount of work that goes into managing a building.

I expect that the months, and years, following the ban could be a steep learning curve with a lot of trial and error as leaseholders and experts within the industry all begin to navigate these new rules and iron out any initial hurdles and problems that arise.If you are currently thinking about purchasing a freehold property and have questions about how the ground rent changes will affect you, please do get in touch today and speak to one of our specialist team.

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