Ground rent is a periodic payment made by a leaseholder to the freeholder as a condition of holding a long lease on a property — now banned on new residential leases in England and Wales.
Ground rent is the payment that a leaseholder makes to the freeholder (landlord) under the terms of a long residential lease. It is distinct from service charge, which covers the cost of maintaining shared areas. Ground rent is essentially a fee for occupying the freeholder's land.
The Leasehold Reform (Ground Rent) Act 2022 banned ground rent on new residential long leases in England and Wales from 30 June 2022. New residential leases must now be at a "peppercorn" — effectively zero. This reform was introduced after a scandal involving escalating ground rents that trapped homeowners.
Problematic ground rent clauses in older leases include: doubling clauses (rent doubles every 10 or 25 years, reaching unaffordable levels); RPI-linked clauses (rent rises with inflation); and high starting rents (£500+ per year). These clauses can make properties difficult to sell or mortgage.
A ground rent of over £250 per year (or £1,000 in Greater London) triggers the property's classification as an Assured Shorthold Tenancy under the Housing Act 1988. This inadvertently gave landlords the right to forfeit the lease for non-payment of ground rent — a wildly disproportionate remedy that the 2022 Act largely addresses for new leases.
Leaseholders on existing leases with problematic ground rent can apply to extend their lease under the Leasehold Reform Act 1993, which converts the ground rent to a peppercorn on extension. The cost of extending depends on the lease length and the original ground rent terms.
No. Service charge covers maintenance and management costs of the building. Ground rent is a landlord's income with no corresponding service obligation. The 2022 Act abolished ground rent on new leases but not service charge.
Not unilaterally by the leaseholder. You can negotiate with the freeholder to cap or reduce the rent, or extend the lease which converts it to peppercorn. The government has indicated further reforms are planned.
No. The Leasehold Reform (Ground Rent) Act 2022 applies only to regulated residential leases (long leases over 21 years). Commercial leases can still have ground rents at market rates.
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