Ground Rent Claims – the Government reacts

The situation in relation to claims arising from leasehold properties has become an increasingly topical issue, with some owners of leasehold properties reporting that their homes are effectively unmortgageable and unsaleable, and frequent claims against conveyancers for poor advice when acting for buyers.

We have looked at the situation in a previous article, particularly focusing on issues around excessive ground rents.

The Government has taken this issue seriously. The Law Commission is running no fewer than three consultations around leasehold issues, specifically on lease extension or enfranchisement, management issues, and the possibility of increasing the use of “commonhold” to deal with some of the problems associated with leaseholds. Commonhold is an alternative form of shared ownership of property to leasehold, which came into existence in 2002. So far, it has seen very little use. The Law Commission’s consultations will be closed by the end of April 2019, but any recommendations (or parliamentary time) are unlikely before 2020.

On 28 March 2019, the Government published a “public pledge for leaseholders”. This is a voluntary agreement by more than 40 named freeholders and developers, which is aimed particularly at dealing with existing leases where the ground rent doubles more frequently than every 20 years. The signatories include household names, and it is significant that freeholders have signed up to the pledge as well as developers: this could cover the situation where a developer has sold the freehold on to a third party. While the pledge will be welcome news to some leaseholders, there are many more whose ground rent might increase in another way, or whose developer/freeholder isn’t one of the signatories. For those leaseholders, a long wait still seems likely.

For insurers dealing with “ground rent” claims, it will be essential to check carefully the exact terms of the ground rent review clause, and the identity of the developer/freeholder, to see whether the “pledge” provides an exit route for an affected leaseholder.

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