The fake narrative about the Ground Rent Cap
Ground rents are payments in return for occupying land on a long-term basis, often in addition to a large first payment (the "premium"). Some ground rents are so high as to render the asset unsalable. Retrospectively reducing these payments has often been proposed as a way of rescuing those assets and for other purposes. And the UK government has just won a case in court on capping ground rents.
Nevertheless, journalists have been pushing the narrative that there *is* no ground rents cap.
The court case was about the law, passed in 2024 on the last parliamentary sitting day of the outgoing Conservative government, that reformed leasehold:
The court identifies the Ground Rent Cap at paragraph 75: 'We refer to this provision as “the Ground Rent Cap”.' It's referring to several provisions of that 2024 legislation.
No ground rent cap?
Yet before and after the case, after the ground rent cap had been announced, commentators both in the broadsheet press and on Twitter all acted like it didn't even exist. Why would the freeholders and the government be fighting an expensive legal battle in court over a law that doesn't exist?
The answer of course is that the idea that there is no ground rent cap is too laughable to be mentioned in court, because it is simply a lie made up by agitators and repeated by journalists. The thing that I find interesting is how *consistently* the journalists maintain the line.
What options were considered for capping ground rents?
Within the formal processes of the political system, a wide range of options for capping ground rents was considered. When I tried to come up with a list of sensible options off the top of my head just now, I came up with a list that turned out to be almost identical to the government's proposed list of options in 2023.
The 2023 ground rents consultation included five main options:
- capping ground rents at a peppercorn
- setting maximum financial value for ground rent
- capping ground rents at a percentage of the property value
- limiting ground rent to the original value when the lease was agreed
- freezing ground rent at current levels
The first three were more seriously considered, with specific values attached to them in more concrete proposals
- Option A: peppercorn, that is to say, £1
- Option B: a fixed value, which was proposed to be £250
- Option C: a percentage of the property value, proposed to be 0.1%
Option A is the most favourable to leaseholders of the three. But Option A was always the least likely, and as between B and C, the one which is more favourable depends on individual circumstances, that is, whether the property is valued at more or less than £250,000.
In the end the government went with Option C: capping ground rents at 0.1%. This figure duly appeared in paragraph 26(4) of Schedule 4 of the 2024 Act and is now law. The freeholders objected in court on ECHR grounds, and last week they lost their case.
Pushing the same narrative
Have a read of this article from The Times to see if you can find this mentioned in this article from a month after the ground rent cap, in the form of Option C, had been enacted:
Bupkis. Unsurprisingly, the actual figures from Options B and C show up a bit in the article, because Options B and C were driven by the behaviour of the lenders in the first place.
Or this more recent one from the Financial Times, which mentions the 2024 Act but only in the context of lease extension, and implies by omission that there's no ground rent cap in place:
"plan" to cap? It has been the law since 2024. The negative space of both articles seems to suggest a desire on the part of someone to avoid mentioning the ground rent cap, or at least who was responsible for it.
Curious.