What does the lease reform bill mean for tenants?

On May 12, 2021, three and a half years after its consultation on reforming the lease system, the UK government released a bill to address the issue of escalating land rents. This followed a lengthy press campaign highlighting the difficulties faced by buyers signing a lease with land rent rising exponentially, which meant they were struggling to finance themselves or sell the property. .

Once implemented, the new legislation will set land rents for new residential emphyteutic leases (21 years and over) at a grain of pepper. The abolition of land rents will not be retroactive.

Below is a brief overview of the bill and what it means for tenants.

Are there any exceptions to the bill?

There are a limited number of exemptions for social housing, condominiums, and Sharia-type agreements when a rental structure is used for financing purposes. Leases of retirement homes are also exempt until March 31, 2023.

What is the impact of the bill on other rents?

One concern that has been raised with the bill is that it appears to ban all rents, not just ground rents. As currently drafted, this would prevent landlords from charging service fees and insurance premiums if they are booked as rent, which will need to be resolved.

How will the proposed legislation be applied?

Local weights and measures authorities and district councils will be responsible for law enforcement with financial penalties for violations ranging from £ 500 to £ 5,000. When payment of a prohibited rent has been made, the landlord will be required to reimburse the tenant. Tenants will also have the right to apply to the lower court for a collection order if they have been charged illegal rents.

How can you begin to prepare?

The bill is one of many reforms promised to the residential market to provide greater protection for residential tenants. Residential developers will need to start factoring in the loss of land rents as a revenue stream in their calculations.

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