Recently, the government announced that landlords would be banned from charging ground rents to future leaseholders. Those caught ignoring these new rules risk being fined between £500 and £30,000. 

Stuart Collar-Brown

Stuart Collar-Brown

While this is welcome news for leaseholders and provides much-needed clarity for the industry after a long period of uncertainty, there are still some factors that leaseholders should be mindful of.

While leaseholders saving money will be a welcome change, the question does need to be asked: at what cost? With ground rent being taken away, the guarantee of the building’s upkeep and maintenance is also disappearing.

At present, ground rent owners have an incentive to manage the buildings and ensure they comply with the laws and regulations.

With ground rent being banned, the responsibility of this will now fall to leaseholders.

One of the problems that arises with this is the risk that the correct policies and procedures will not be followed. With the buildings no longer being maintained to the required level, regular checks not taking place and policies forever changing, a chaotic situation arises.

Something should be put in place to ensure buildings continue to be maintained and health and safety requirements are adhered to. In my opinion, a better option would be a fair contribution – be it monthly or yearly – of a 0.1% charge to guarantee the legal protection, security and peace of mind that a professional third party is looking after the building.

This is a small price for leaseholders to pay in comparison with the amount of work that goes into managing a building, which I think will surprise and shock them once the management from ground rent ends.

I expect that the coming months and years following this ban could be a steep learning curve as the industry begins to navigate the new rules and finds a solution that works practically, and financially, for all parties.

Stuart Collar-Brown is director and co-founder of My Auction