Onerous Lease Clauses – New Industry Pledge

Over 40 property developers and freeholders have signed an industry pledge to help leaseholders trapped by onerous lease terms.

The public pledge is backed by the government, and signatories have committed to taking active steps to identify leases within their portfolio that provide for the ground rent to double more frequently then every twenty years.

Where such leases are identified, the freeholder signatories pledge to contact such leaseholders and offer to vary the leases, such that rent increases are linked to the Retail Price Index.

Freeholder and developer signatories also pledge not to include such onerous clauses in new leases.

Onerous leasehold clauses, including escalating ground rents, have made headlines in recent times.

However, it is not only ground rent provisions that can be problematic, or make properties unmortgageable or unsaleable, so buyers of long leasehold interests must exercise caution to ensure that any provisions within the lease are not unduly onerous.

Further, it would not be prudent for a buyer to merely rely on the pledge, not least because the landlord/freeholder may not have subscribed to the scheme.

Leases are complicated documents and specialist advice should be procured at an early stage.

For assistance with such matters, please contact our commercial property & residential property teams.