As part of the latest moves from the Government to reform Leasehold Property, from 30 June 2022, landlords of regulated leases must not require a leaseholder to make a payment of prohibited rent.

The peppercorn limit generally only applies to new residential leases that were granted after the commencement of the Act, that is leases granted on or after 30th June 2022. If you bought a new (regulated) lease after this date you will not be faced with financial demands for ground rent. There are some exceptions to this, such as voluntary or non-statutory lease extensions, which can retain the existing level of ground rent for the remainder of the original lease period.

The Act also bans landlords from charging administration fees for collecting a peppercorn rent. If a landlord charges ground rent in contravention of the Act, they are liable to receive a financial penalty between £500 to £30,000.

So what this means is that if you own a leasehold property with a new lease that starts after June 2022 the freeholder cannot charge you ground rent above a peppercorn rent. Peppercorn rent is defined as a very low or nominal fee, widely regarded as being between £1-10 per annum. But this does not affect leases that have been in place prior to 30th June 2022.

The idea behind this reform is to make homeownership fairer and more transparent for leaseholders, as well as tackling the current conception that the leasehold system has been damaged by unfair practices that have seen some leaseholders contractually obligated to pay onerous and escalating ground rents, with no clear service in return. The Act will prevent this from happening in future, tackling significant ambiguity and unfairness for future leaseholders.