On 8 February 2022, The Leasehold Reform Act 2022 received its Royal Assent. The legislation’s main aim is to restrict ground rents for most new long residential leasehold properties to a peppercorn meaning, no financial value. The Act applies to England and Wales, and the Act was brought into force on 30 June 2022.

The Leasehold Reform Act 2022 means that landlords of new leases must not require a leaseholder to make a payment of prohibited rent. Historically, a ‘peppercorn’ ground rent often meant a rent that was of nominal or low value. This Act restricts ground rents on new leases to a peppercorn rent only, effectively restricting these ground rents to no financial value.

The purpose of this limit is to prevent leaseholders from getting trapped by rising rents, creating fairer relationships between freeholders and tenants, and providing greater transparency regarding ownership for leaseholders. This Act also stops administration charges surrounding rents and acts as an anti-avoidance measure

How will this affect leaseholders and developers?

The question raised by the commencement of this Act is, how will this affect leaseholders and buyers?

If you bought a new (regulated) lease after 30 June 2022 you will not be faced with financial demands for ground rent. There are some exceptions to this, which are community-led housing, applicable business leases and a grant of a lease before 30 June 2022.

As a freeholder granting a new lease or as a property developer who wants to sell a residential home as an individual leasehold, you should ensure you remain up to date on any new legislation to ensure you are not breaching the rules of any new policy. 

You should understand your obligations and review any ground rent clauses in your leases before entering into it with a new buyer. 

The solicitors at Eric Robinson will provide you with the necessary advice when it does come to reviewing, renewing or creating new residential long leases, helping you to ensure you are in compliance with the Act.

The Leasehold Reform Act’s purpose is to ensure the leasehold system achieves the following for leaseholders:

• operate fairly for leaseholders
• not to cause delays in the home buying and selling process

They wanted to make it easier and cheaper for leaseholders to:

• extend their lease
• buy their freehold
• take over management of their block

If a landlord charges ground rent contravening the Act (and the monies have not been returned by them within 28 days of receipt), they could be liable to receive a penalty between £500 and £30,000.

This Act sets out the Government’s efforts to modernise the leasehold system and make it fairer and more transparent for all.

How are lease extensions affected by the Leasehold Reform Act 2022?

Voluntary or statutory lease extensions for housing and flats are not included in this area. 

With regard to voluntary lease extensions, the ground rent that can continue to be charged should not exceed the amount specified in the lease for the remaining term before reverting to a peppercorn rent for the extended term.

Finally, with retirement homes, the legislation will only apply to new leases of these properties granted after 1 April 2023.

Lease extensions are a complex area of law and it is essential that you get in touch with a specialist property lawyer who understands the various processes involved in the lease extension experience.

How can Eric Robinson Solicitors Help? 

The area covering the Leasehold Reform Act 2022 is a complex area of law. 

Eric Robinson Solicitors have expert Conveyancing Solicitors, who can help you through this process and navigate the Act, whether you are a landlord or leaseholder, for either residential and commercial properties. 

We have offices located in Southampton (Hedge End & Bitterne), Winchester, Lymington, London (Richmond) and Chandlers Ford. 

Contact Eric Robinson Solicitors today for expert family law advice on 02380 218 000, or simply fill out our contact us form.

The Different Types Of Joint Ownership

When a sole individual owns a property, they are referred to as the sole proprietor (or the sole legal owner). If more than one person owns a property together, they are considered co-owners.

There are two types of property co-ownership: joint tenants and tenants in common. When considering the term “tenants” in this context, it should not be confused with a tenant under a lease; they are completely different concepts when referred to in legal terms.

Joint Tenants

If you and another hold the property by reason of a joint tenancy, this means that neither person will possess a divisible share in the equity. 

Instead, the right of survivorship is applicable and the property will automatically pass to the remaining co-owner upon the death of the other. 

Joint tenants will not have a share of the property which could be potentially passed or shared under a Will

Tenants in Common

Under a tenancy in common, each person will have their own divisible share in the property and there will be no right of survivorship and you can still pass on your share of the property in your Will.

Changing Ownership

The way in which you hold property is dependent on a property transfer. You can change co-ownership of a property, and this can be as a result of some form of dispute such as separation or divorce or with marriage. 

There are occasions where co-ownership is changed automatically, for example, if one co-owner becomes bankrupt

What to Consider Before Entering a Joint Property Ownership

The courts are regularly asked to resolve disputes between co-owners of a property regarding the rights that each co-owner has when the relationship breaks down, if one co-owner dies or if the property is sold. 

When you do buy a property with someone else, it is important to obtain legal advice on how you plan on holding the property. If you have a clear structure in place at the outset this will help avoid disputes in the future.

When you are purchasing a property as a co-owner, it is important to take into account the following considerations:

• Seek legal advice on which form of co-ownership is the most suitable for you and ensure that it is clearly recorded in the transaction documentation.

• With tenancies in common, it is always advisable to put in place a trust deed which sets out each co-owner’s rights, shares, entitlements and what would happen if one co-owner wishes to sell but another objects.

It is highly important to consider each co-owner’s contribution to the purchase price, any outgoings for the property and mortgage. 

If both the co-owners are on the mortgage, there will be joint and several liabilities in the event of default – this means that the mortgage company can pursue one co-owner for all of the mortgage arrears.

With a carefully considered trust deed you may improve your chances of recovering monies that you are required to pay to a mortgage company on behalf of a fellow co-owner.

How Do Joint Ownership Disputes Typically Arise? 

Disputes can often arise if a party purchases a property in their sole name and over time, another party contributes to the property by a way of mortgage payments, outgoings, or even part of the purchase price.

The legal title will remain in sole ownership, but one party may look into establishing beneficial ownership in the property and also attempt to prove that there was an agreed intention that both parties would be entitled to a share in the property. 

It is important to seek legal advice and putting in place co-ownership agreements will help to protect each party’s interest.

A joint tenancy may not be the appropriate decision if one of the co-owners has contributed a higher amount towards the purchase price than the other co-owner(s), especially where the party making the larger contribution wishes to retain scope to have their larger contribution properly recognised on any separation or future sale of the property. 

A joint tenancy could also be unsuitable if you have any family from a previous marriage and you would like to leave your share of the property to your children as opposed to your co-owner.

Eric Robinson Dispute Resolution Specialists

At Eric Robinson Solicitors we help you resolve your dispute as quickly and as inexpensively as possible. 

We will always give you the best practical and strategic advice designed around your needs. There is more than one way of resolving a dispute and it needn’t involve the courtroom.

Our expert lawyers will explain all of the options to you and help you explore the best one for your business.

We’re experienced negotiators and tacticians as well as having commercial awareness and the ability to work closely with our clients and their other professional advisers.

To find out more about how we can help you resolve any co-ownership disputes or avoid any potential disputes, call us on 02380 218000.