Freeholders face fines of up to £30,000 if they try to charge leaseholders illegal ground rents.

The deterrent will apply to ground rents banned under the Leasehold Reform (Ground Rent) Act 2022 which received Royal Assent last week and will come into force within six months.

The Act, described by the Government as ‘part of the most significant changes to property law in a generation’ is designed to put an end to the charging of ground rents. It applies to new long residential leasehold properties in England and Wales.

This is the first of ‘two-part seminal legislation’ to reform the leasehold system. Further leasehold reform legislation is promised. 
Once it commences, the Act limits any ground rents included in new long residential leases to ‘one peppercorn’ per year, the conventional legal phrase for something having no value. 

The Act also bans freeholders from charging administration fees for collecting peppercorn rents.

‘We are also enforcing the charging of a prohibited ground rent by way of a civil penalty regime, including fines of up to £30,000 for freeholders that charge ground rent in contravention of the Act’, said the Government in guidance published this week.