Robert Haigh, Director (Valuation Consultancy) at Chestertons comments:

“The government’s announcement that ground rent will be capped at £10 per annum for any new lease granted on a flat or apartment can be seen as a positive for future buyers, and on the face of it removes the potential for abuse of the system by freeholders who have in the past inserted the infamous doubling ground rent clauses on compound basis. However, the concern is that the legislation won’t be far reaching enough. The system of ground rent in the lease at a reasonable level has worked for centuries and by restricting its use to this extent it may force the relatively nominal cost to be moved to other areas that are harder to regulate. For example, the service charge is usually contained within a separate clause within a lease so this will remain untouched. I have seen recent service charge clauses that allow a management company to charge an element of profit and I fear that this may become the norm. It is possible that management companies will then pay developers for the right to be made the first provider of management services and seek to recoup a profit from leaseholders who will find it hard to organise and effect a change of management company. This will arguably have a net negative effect for leaseholders in the short term and be harder to rectify.

“The removal of leasehold for houses in the majority of cases is undoubtedly a positive step for a leaseholder. However, the cap at £10 per annum for new leases on flats to me feels a little bit like a ‘knee jerk’ reaction with the government medalling in a largely sound system that has worked fairly for both leaseholders and freeholders for many generations, but has recently been abused by a few rogue landlords.

“I hope that the new regulations will be a benefit to the leaseholders of flats as well as houses but I am fearful that there will still be new loopholes that will be exploited by those who wish to do so.”