Ground Rent

The Leasehold Reform (Ground Rent) Act 2022, which came into force on 30 June 2022, prohibits landlords from charging ground rent (other than a peppercorn — effectively zero) on regulated leases for new residential dwellings in England and Wales. Retirement home leases were brought into scope from 1 April 2023. Existing leases granted before those dates are not affected and may still contain doubling ground rent or RPI-linked review clauses. Problematic ground rent clauses in existing leases can affect mortgageability: lenders often decline to lend where ground rent exceeds £250 per year (£1,000 in Greater London) or has review provisions that could lead to it doing so. The Leasehold and Freehold Reform Act 2024 gave leaseholders extended rights to reduce onerous existing ground rents when extending their lease.

In practice, ground rent buys you nothing — it is a pure payment for the land, with no service attached, which is exactly why it became controversial. What matters is not the current figure but the review clause. A rent of £250 that doubles every ten years reaches four figures within a generation and can make a flat unsellable long before that. Read the review mechanism in the lease before you look at the amount.

Worked example: Priti owns a flat let on a lease granted in 2015 with ground rent of £295 rising with RPI every five years. Her lender flags the rent because it is close to the threshold above which some lenders decline. She has two routes. She can negotiate a deed of variation with the freeholder to reduce the rent to a peppercorn, paying a premium for it. Or she can extend her lease using the statutory route, which adds 90 years and reduces the ground rent to a peppercorn as part of the same transaction — often better value, because she gains term as well as removing the rent.

The misconceptions matter when buying. Ground rent is not the same as service charge: one is for the land, the other for maintaining the building, and they are demanded under different rules. A ground rent demand is only payable if it is served in the prescribed form with the correct notice period, so an informal invoice can be challenged. And the 2022 ban does not help most existing leaseholders — it applies to new leases, so an older lease keeps its clause until it is varied or the lease is extended.

Ground rent is a feature of leasehold title owed to the freeholder, and sits separately from the service charge. If your rent is rising or blocking a sale, read our guides to ground rent disputes and extending your lease, and get a valuation before you negotiate.