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Dave Pickett bought his first home in 2019 and remembers being “overwhelmed” by the complexity of the lease agreement.
When he bought the leasehold on a duplex in Hitchin, hertfordshire, He said he knew there was one ground rent – an annual fee paid by a leaseholder to freeholder – £25 per year.
But months later the 33-year-old communications professional received a letter saying the fee should be reviewed in 2018 and he expected it to rise by £2,000 to £3,000 a year.
After a lengthy arbitration, in 2023 he and others on his block were ordered to pay £2,350 a year – a 9,000% increase on the ground rent he paid when he bought the house. Not only that, but the arbitrator chose to backdate the price increase to 2018, leaving Mr Pickett with a bill of £17,000.
Tuesday government announced that land rent cap Renters in England and Wales pay £250 a year as part of a major change in home ownership.
Pickett said the cap is “the best news ever” for people in his neighborhood.
“Not only does this help reduce the annual financial costs, but it also opens the way for us to purchase the freehold and take back control of our units,” he said. “I’m very optimistic about it.”
Around 4.83 million homes in England are leasehold, meaning the owner has the right to occupy the property from the freeholder for a certain number of years. Ground rent is usually paid annually and is subject to periodic increases due to Retail Price Index (RPI) inflation.
“As a first-time buyer, the complexities of leasehold and marriage value are complex,” he said. “There’s no support.”
Pickett said ground rents on his block made the apartments “unsaleable”, adding that a report he commissioned found his property would be worth around £30,000 less on the open market if he decided to sell.
The 33-year-old ultimately opted to pay for the lease extension but said the changes introduced as part of the draft Leasehold and Common Rights Reform Bill were “a step towards restoring some degree of equality between freehold and leasehold rights”.
“It’s hard to accept”
Not everyone is so positive about the reform.
Pensioner David Ridell, 66, lives in Hendon, north London. He pays ground rent of around £226 a year, meaning he won’t benefit from the cap.
He said that while some people would undoubtedly benefit from the change, he found the announcement “difficult to swallow” after Labor’s manifesto pledged to abolish leasehold rights altogether.
Mr Ridell pointed out that according to estimates from the 2023/24 English Housing Survey, rent-to-own owners reported paying an average ground rent of £304 per year, meaning the average benefit from the policy was likely to be around £54 per year.
“My local MP posted that this would ‘change people’s lives’,” he said. “But even those who benefited would only benefit an average of £54.
“It’s better than nothing, but it’s not life-changing.”
He criticized plans to reduce ground rents to “pepper prices” within 40 years.
“I’ll be 107 then, so I’m looking forward to it,” he said. “The way it spins makes me angry.”
Mr Riddell said he pays around £250 a month for the service and he “really wants to see an improvement on this”.
“What they promised at the election and what they announced today is chalk and cheese,” he added.
Make big announcements in published videos Tik TokMr. Prime Minister Keir Starmer Said: “I’ve spoken to a lot of people and they said it would have an impact on them worth hundreds of pounds.
“That’s very important because cost of living is the most important thing in the country.”
Critics of the Residential Freehold Association (RFA), the trade body representing professional freeholders, said the ground rent cap was “completely unreasonable” and warned of the reputational impact it would have on UK investors.
It said the cap on ground rents would damage investor confidence in the UK property market as freeholders lose “long-established” contractual rights.
It added: “The resulting forced exit of professional freeholders from the industry will hamper building safety projects and disrupt residents’ daily lives.”
But the National Tenancy Campaign (NLC) said it was “disappointed” the government had not immediately enforced pepper rents, but admitted a £250 cap would bring “relief”.
“We have been fighting for years for low rents and an end to this abusive system,” said Katie Kendrick, children’s nurse and co-founder of the National Library. “While today’s announcement on ground rents is lower than immediate ground rents, the Bill as a whole is a further step towards abolishing the tenancy system in England and Wales.”