This year, Royal Assent was given on the 8th of February, limiting ground rents under a long leasehold to a peppercorn ground rent.
This has torn up the old rules on creating residential apartments, Title splitting – freehold – leasehold.
The old fashioned strategy where property investors manipulated ground rents and lease terms to add value to their freeholds are a thing of the past. As part of their levelling up programme, the government is creating a fairer playing field for the consumer when buying houses and apartments.
The Act protects consumers from getting trapped in properties with escalating ground rents. Its effect is the old title splitting strategy will no longer work.
The old fashioned practice of annual multipliers to increase ground rents led to owners of apartments being unable to sell or remortgage their properties. Affectivity trapping them.
This can no longer happen for new residential leases once the legislation is implemented, which is expected to be in summer 2022.
It is also being missed by some commentators that reducing the ground rent to a peppercorn in certain circumstances will apply to existing residential long leases.
Landlords and managing agents that get this wrong face fines up to £30,000.
The opportunity is to embrace and learn how to apply the new future proof methodology encompassing the new Leasehold Reform Act and prepare for Commonhold by creating friendly leases. You will then be ahead of your competition when title splitting as a property investor.