What is the effect of charging a permitted ground rent in a new long lease after 2022?

Question

The Leasehold Reform (Ground Rent) Act 2022 makes it illegal to charge a ground rent on any new lease other than that of an actual peppercorn. Why would it allow such a tokenistic practice, rather than simply abolishing ground rents entirely? I don’t think this question as such is speculative or better placed on politics, because the answer may be found in explanatory notes or Hansard rather than the law itself and is thus in any event more likely to be known or found by users here than over there.

But furthermore even if it is not specified, I am not asking about why in the sense of what drove legislators to provide for this, as much as I am asking why in the sense of what legal effect it would have for a lease to be drafted to charge an actual peppercorn for ground rent as allowed in the Act rather than not charging any at all. What other provisions does that circumstance engage, that would make it actually worth including?

Answer 1

'Consideration' is one necessary element of a simple contract at common law. A promise of something of some value to be exchanged for something else of some value. They need not be equal values.

The functions of consideration are explained in answers to this Law.SE question: What is the point of requiring consideration in a contract?

The reason for 'peppercorns' in contract law is to satisfy that consideration element of the contract. In this context peppercorn means a token, nominal or low value.

Instead of upending contract law in this context by ignoring consideration the Act defines (for the first time) a peppercorn rent as the annual rent of one peppercorn. (It doesn't say the ground rent must be an actual peppercorn.)

The Act restricts 'ground rents' on new leases (unless an excepted or non-regulated lease) to a peppercorn rent.

The Act prevents unscrupulous freeholders/landlords for charging whatever they want for ground rent, escalating ground rent or charging for administration of collecting ground rent, with no clear service in return. This is explained in the Policy Background of the Explanatory Notes linked in the question. See also the United Kingdom section of the Wikipedia article about ground rents.