Residential Leasehold Reform Update

Ground Rents Income Fund PLC

31 May 2024

 

Ground Rents Income Fund plc

RESIDENTIAL LEASEHOLD REFORM UPDATE

Ground Rents Income Fund plc (the 'Company') notes the enactment of the Leasehold and Freehold Reform Act 2024 (the 'Act') on 24 May 2024.  The Act forms part of the Government's residential leasehold reform agenda, launched in 2017, and was the final piece of relevant legislation passed by Parliament ahead of the General Election on 4 July 2024. 

The Act follows the Government's consultation (the 'Consultation') in November 2023 seeking views on restricting the level of existing residential ground rent that leaseholders pay in England and Wales, which included the Government's stated intention not to pay compensation to freeholders.  This Consultation represented a significant shift in the Government's approach to leasehold reform and led to a pause in market activity and negatively impacted values. The Company subsequently worked with industry peers and advisers to prepare a comprehensive response to this Consultation that was submitted in line with the Consultation timetable on 17 January 2024.

Following submissions to the Consultation by industry and others, to which the Government is yet to respond, the Act does not impose restrictions on ground rent payable under existing residential leases.  Consequently, leaseholders must continue to pay ground rent in accordance with their lease terms.

Although this represents a better outcome for the Company than contemplated in the Consultation, the Act contains provisions that are relevant to the Company, including:

·      Making it easier and cheaper for leaseholders to buy out their ground rent, extend their lease or acquire their freehold, a process known as 'enfranchisement'

·      Improving transparency over service charge and insurance costs for leaseholders

·      Making it easier and cheaper for leaseholders to assume management of their building

The majority of the Act, including the key provisions outlined above, will only come into force once the Secretary of State passes additional secondary legislation. Uncertainty therefore remains about how and when the legislation will come into force, as well as whether any future Government will continue to advance residential leasehold reform in whole, or in part or at all.

The Company and its external advisers are working to better understand the detail of the new legislation and its potential impact on the portfolio.  As previously communicated to investors, the Company has a clear strategy to address the headwinds arising from leasehold reform and building safety, whilst demonstrating best-in-class residential asset management.  Against this challenging backdrop, the Company, alongside other institutional owners, continues to advocate for leasehold reform that fairly balances the legitimate interests of responsible landlords with the interests of leaseholders, whilst also delivering industry wide improvements in terms of transparency, value for money and service levels.

Due to this ongoing work, Companies House and The International Stock Exchange Authority Limited have approved a further extension to the Company's 30 September 2023 accounts filing date to 30 September 2024.  The Company does however expect to issue its accounts before 30 June 2024, and hold a separate Extraordinary General Meeting in advance of 30 September 2024, at which the Accounts will be presented to shareholders and shareholder resolutions relating to the Accounts will be proposed.

For further information: 

Schroder Real Estate Investment Management Limited Nick Montgomery / Chris Leek / Matthew Riley	020 7658 6000
Singer Capital Markets (Broker)  James Maxwell / Alaina Wong	020 7496 3000
Appleby Securities (Channel Islands) Limited (Sponsor)  Michael Davies	01534 888 777
FTI Consulting Richard Gotla / Dido Laurimore / Oliver Parsons	020 3727 1000

Notes to editors:

Ground Rents Income Fund plc (the 'Company') is a closed-ended real estate investment trust ('REIT'), listed on The International Stock Exchange ('TISE') and traded on the SETSqx platform of the London Stock Exchange. 

Schroder Real Estate Investment Management Limited (the 'Manager') was appointed as the Company's Alternative Investment Fund Manager in May 2019 to support the Company's Board with the headwinds related to building safety reform and leasehold reform. 

During the first half of 2023 the Board and Manager carried out an extensive shareholder consultation on proposals to change the Continuation Vote mechanism included in the Articles dating from 2012, as well as proposed changes to the Investment Policy.  These proposals received strong support from shareholders and resulted in a new Continuation Resolution and Investment Policy.  The new Investment Policy adopts a strategy of realising the Company's assets in a controlled, orderly and timely manner for shareholders, whilst continuing to deliver best-in-class residential asset management including fairness, transparency, and affordability for leaseholders. 

Please see the Company's website for more information: www.groundrentsincomefund.com 

 

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