‘My ground rent increased by 9,000 per cent after I bought a flat’
Dave Pickett bought his first home in 2019 and recalls feeling “overwhelmed” by the complexity of the lease.
Hitchen said that when he bought the lease for his maisonette in Hertfordshire, he knew there was a ground rent (an annual fee paid by the leaseholder to the landlord) of £25 per annum.
But a few months later, the 33-year-old communications specialist received a letter saying the pay was due to be reviewed in 2018 and he could expect it to rise by between £2,000 and £3,000 annually.
After a lengthy arbitration, it was decided that he and others in his block must pay £2,350 a year in 2023; This was a 9,000 percent increase in ground rent compared to when he bought his house. Not only that, but the arbitrator chose to defer the increase until 2018, leaving Mr Pickett with a £17,000 bill to pay.
On Tuesday the government announced it would cap ground rent paid by leaseholders in England and Wales to £250 a year as part of major changes to homeownership.
Mr Pickett said the hat was the “best news ever” for those on his block.
“Not only does this help with the financial cost each year, but it also opens the way for us to purchase ownership and take back control of our units,” he said. “I’m very positive about it.”
Approximately 4.83 million homes are rented in the UK; This means that landlords have the right to take possession of the property from the owner for a certain period of time. Ground rents are generally paid annually and are subject to increases in line with RPI inflation, usually at fixed intervals.
“As a first-time buyer, the complexity around rent and marriage value is extremely complex,” he said. “There was no support”
Mr Pickett said the ground rent on his block made the flats “unsellable”, adding that a report he prepared revealed the value of his property would have been reduced by around £30,000 on the open market if he had decided to sell.
The 33-year-old eventually opted to pay for the lease extension, but said changes made under the Draft Tenancy and Tenancy Reform Bill were “a step towards restoring some equality between freehold and leasehold ownership”.
‘He feels hard to stomach’
Not everyone is so positive about the reforms.
Pensioner David Ridell, 66, lives in Hendon, North London. He pays around £226 a year in ground rent, meaning he is not eligible for the cap.
While some will undoubtedly benefit from the change, he said he found the announcement “unacceptable”, following Labour’s manifesto to abolish leasehold altogether.
Mr Ridell pointed out that according to the British Housing Survey’s 2023/24 forecasts, owner-occupiers report paying an average of £304 a year in ground rent; This means the average benefit of the policy is likely to be around £54 per year.
“My local MP made a post saying this would ‘change people’s lives’,” he said. “But even those who will benefit from this will only benefit by an average of £54.
“It’s better than nothing, but it won’t change lives.”
He criticized the plan to reduce land rents to ‘pepper rate’ within 40 years.
“I’ll be 107 by then, so I’m looking forward to that,” he said. “The twist of this makes me so angry.”
Mr Ridell said he was paying a service charge of around £250 a month and “really wanted something to be done about it”.
“What they promised in the elections and what they announced today is chalk and cheese,” he added.
Prime Minister Sir Keir Starmer, who made the important announcement in a video posted on TikTok, said: “I’ve spoken to so many people who say this will make a difference worth hundreds of pounds to them.
“This is really important because the cost of living is the most important thing across the country.”
Critics from the Residential Property Association (RFA), the trade body that represents professional landlords, said the ground rent cap was “completely unfair” and warned of its impact on the UK’s reputation with investors.
He said the floor rent cap would damage investors’ confidence in the UK housing market as property owners would lose their “long-standing” contractual rights.
“The forced departure of professional property owners from the industry will hinder construction safety projects and disrupt the daily lives of residents,” the statement said.
But the National Leasing Campaign (NLC) said it was “disappointed” the government had not immediately introduced pepperfield rents, but acknowledged the “relief” the £250 cap would bring.
“We have been campaigning for years for pepper plantation rents and an end to this exploitative system,” said Katie Kendrick, a pediatric nurse and co-founder of the NLC. “While today’s announcement on ground rents does not go far enough to meet the urgent need for peppercorn ground rents to be paid, this bill as a whole is another step forward in the dismantling of the leasehold system in England and Wales.”
