Ground Rents Income Fund plc
(the 'Company')
Update on Government consultation on leasehold reform
On 9 November 2023, the UK Government published a consultation, ‘Modern leasehold: restricting ground rent for existing leases’, seeking views on limiting the level of residential ground rent that leaseholders pay in England and Wales. The consultation documents can be found at the following link:
Modern leasehold: restricting ground rent for existing leases - GOV.UK (www.gov.uk)
The consultation represents a shift in the Government’s approach to leasehold reform, which had previously focussed on capping the treatment of ground rent in the enfranchisement process. As a result, the Company’s independent valuer, Savills, in discussion with other valuers and the Royal Institution of Chartered Surveyors, has confirmed they are likely to adopt a Material Valuation Uncertainty Clause (‘MUC’) for the whole portfolio until there is greater certainty on the outcome of the consultation and its impact on the ground rent market. Savills have also confirmed the MUC will not be retrospectively applied to the Company’s independent valuation as at 30 September 2023.
If the MUC is applied to the Company’s portfolio valuation as at 31 March 2024, this would extend the MUC scope beyond those properties already impacted by building safety related defects, which represented approximately 16% of portfolio value as at 31 March 2023.
Subject to the outcome of the consultation, the Government aims to introduce reforms through the Leasehold and Freehold Reform Bill, which was announced during the King's Speech on 7 November 2023. The Company will respond to the consultation, which closes on 21 December 2023, and summarise the response in the forthcoming year end accounts to 30 September 2023, due to be released in early 2024.
As noted in regular investor communications, the Company has a clear strategy to address the headwinds arising from building safety and leasehold reform, whilst demonstrating best-in-class residential asset management. Against this challenging operational backdrop, the Company has advocated 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.
Notes to editors:
Ground Rents Income Fund plc is a closed-ended real estate investment trust, listed on The International Stock Exchange 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 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.
See the Company’s website for more information:
Ground Rents Income Fund plc - GRIO (schroders.com)
Enquiries:
Schroder Real Estate Investment Management Limited
Nick Montgomery / Matthew Riley / Chris Leek
020 7658 6000
FTI Consulting
Richard Gotla / Dido Laurimore
0203 727 1000 / Schroderrealestate@fticonsulting.com
Singer Capital Markets (Broker)
James Maxwell / Alaina Wong (Investment Banking)
Sam Greatrex (Sales)
020 7496 3000
Appleby Securities (Channel Islands) Limited (Sponsor)
Andrew Weaver / Michael Davies
01534 888 777