Ground Rent UK Guide
Ground rent has been one of the most contentious issues in UK property law over the past decade. This guide explains what ground rent is, the landmark 2022 reform banning it on new leases, how to deal with existing ground rent, lease extension rights, and the ongoing leasehold reform programme.
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What Is Ground Rent?
Ground rent is a payment made by a leaseholder to their freeholder (the owner of the land) as a condition of the lease. It is quite separate from service charges and has historically been a modest, often nominal amount — hence the term "peppercorn rent" for a very small or zero payment.
In the UK, the vast majority of flats and many houses were historically sold on long leases (typically 99, 125, or 999 years) rather than as freehold. Under leasehold, the buyer does not own the land — only the building or flat for the duration of the lease. The freeholder owns the land and collects ground rent in addition to retaining a reversion (the right to get the property back when the lease expires).
Ground rent became controversial in the 2000s and 2010s when large housebuilders began inserting clauses into new-build leases that caused the rent to double every 10 years. These doubling clauses made properties increasingly difficult to mortgage and sell as the ground rent escalated, trapping leaseholders.
The Leasehold Reform (Ground Rent) Act 2022
The Leasehold Reform (Ground Rent) Act 2022 came into force on 30 June 2022 (1 April 2023 for retirement properties). It is a landmark law that fundamentally changed the ground rent landscape for new leases:
- Any new regulated residential lease granted after 30 June 2022 must specify only a peppercorn ground rent — meaning zero actual payment
- Freeholders who charge more than peppercorn on new leases face a civil penalty of £250 to £30,000 per lease
- The prohibition applies to lease renewals, lease extensions under the statutory scheme, and new leases granted in connection with the sale of a new property
What the Act does NOT cover: It does not retrospectively reduce or eliminate ground rent on existing leases signed before 30 June 2022. If you own a pre-2022 lease with a ground rent clause, that ground rent remains legally payable unless you take action to extend your lease under the statutory scheme (which reduces it to peppercorn).
The Doubling Ground Rent Scandal
The scale of the problem with doubling ground rents became widely understood around 2016–2018. Millions of leaseholders — particularly those who bought new-build flats and houses from major developers including Taylor Wimpey, Persimmon, and Bellway in the 2000s and 2010s — discovered that:
- Their ground rent would double every 10 years, potentially reaching hundreds of thousands of pounds per year over the life of a 99-year or 125-year lease
- Mortgage lenders were refusing to lend against properties with onerous ground rent clauses (generally defined as ground rent exceeding 0.1% of property value, or with doubling clauses)
- Properties with doubling ground rents were becoming unsaleable as buyers could not obtain mortgages
- The freeholder in many cases was a fund — the original housebuilder had sold the freehold to an investment vehicle — so there was no goodwill relationship to fall back on
Taylor Wimpey announced a ground rent review scheme in 2017, and the Competition and Markets Authority (CMA) took enforcement action against several developers and freeholders from 2020 to 2022, securing voluntary commitments to reduce doubling rents to RPI-linked increases instead. However, many leaseholders remain on onerous terms.
How to Check Your Ground Rent
To understand your ground rent situation, you need to review your original lease. Check:
- The ground rent schedule: Look for "ground rent" clauses. What is the initial amount? When does it increase? By how much?
- Doubling clauses: Any clause saying rent doubles at regular intervals is an onerous doubling ground rent
- RPI-linked clauses: Increases linked to the Retail Price Index are less problematic but can still escalate above inflation over long periods
- Review dates: When is the next review date and what will the new rent be?
If you cannot find your original lease, contact your solicitor who acted on your purchase, the Land Registry (leases over 7 years are registered), or write to your freeholder or managing agent.
Challenging Excessive Ground Rents
Options for leaseholders with existing onerous ground rents depend on the circumstances:
1. Voluntary Negotiation with the Freeholder
Some freeholders — particularly where there has been public or regulatory pressure — are willing to voluntarily agree to vary the lease to cap or reduce ground rent increases. There is no legal right to demand this; it requires negotiation. You may be asked to pay a premium for the variation.
2. Statutory Lease Extension
The most powerful tool is the statutory lease extension under the Leasehold Reform, Housing and Urban Development Act 1993. Extending your lease under the statutory scheme adds 90 years to your unexpired term AND reduces the ground rent to a peppercorn. Once extended, you pay zero ground rent for the life of the extended lease. This is typically the best solution for leaseholders with onerous ground rent clauses.
3. First-Tier Tribunal (Property Chamber)
If a landlord has failed to serve the correct ground rent demand notice (using prescribed form, with the correct information, served correctly), the ground rent is not legally payable until the notice is corrected. The First-Tier Tribunal can also determine whether ground rent clauses are unfair under the Consumer Rights Act 2015, though this route is expensive and uncertain.
4. CMA Enforcement and Consumer Rights Act
The Competition and Markets Authority continues to monitor ground rent practices. Leaseholders who bought properties with doubling ground rent clauses may have claims under the Consumer Rights Act 2015 if the clause is deemed unfair. Seek specialist leasehold solicitor advice.
Lease Extension: Your Statutory Right
Every qualifying leaseholder of a flat in England and Wales has the right to extend their lease by 90 years on top of the unexpired term, with ground rent reduced to peppercorn. This is a statutory right — the freeholder cannot refuse, though they can negotiate on price.
Qualifying Conditions
- The property is a flat (houses have separate rights under the 1967 Act)
- The original lease was for more than 21 years
- You have owned the property for at least two years
- You are a long residential leaseholder (not a business or commercial tenant)
The Lease Extension Process
- Instruct a specialist leasehold solicitor and a chartered surveyor experienced in lease extensions
- The surveyor values the extension premium and advises on strategy
- Serve a Section 42 Notice on the freeholder stating your proposed premium
- The freeholder has 2 months to respond with a Section 45 counter-notice
- You have 6 months from the counter-notice to either agree a price or apply to the First-Tier Tribunal to determine the premium
- Once the premium is agreed or determined, the solicitor completes the lease extension
Cost of a Lease Extension
The statutory premium for a lease extension is calculated using a formal valuation methodology. The components are:
- Ground rent capitalisation: The present value of the ground rent the freeholder will lose (usually a relatively small amount)
- Reversionary value: The present value of what the freeholder will receive when the lease expires (the freehold value of the flat after a very long lease has little present value)
- Marriage value: 50% of the increase in property value arising from the extension. Marriage value is only payable if the unexpired term is under 80 years. Once the lease drops below 80 years, extension costs increase substantially and the "80-year cliff" effect is well documented in the market
As a very rough guide, extending a lease on a £300,000 flat:
| Unexpired Term | Estimated Premium Range | Notes |
|---|---|---|
| 90+ years | £3,000 – £8,000 | No marriage value. Act quickly if approaching 80 years |
| 80–90 years | £8,000 – £20,000 | Still no marriage value but increasing reversionary element |
| 70–80 years | £20,000 – £50,000 | Marriage value now applies — significant cost increase |
| 60–70 years | £40,000 – £80,000 | Mortgage difficulties likely below 70 years |
| Below 60 years | £60,000+ | Premium can approach or exceed 10–20% of property value |
Professional surveyor and solicitor fees (typically £2,000–£5,000 combined) are additional and must be paid by the leaseholder. You must also pay the freeholder's "reasonable" legal and surveyor costs.
Collective Enfranchisement: Buying the Freehold
Where at least 50% of qualifying leaseholders in a building participate, leaseholders have the right to collectively purchase the freehold of their building through the Leasehold Reform, Housing and Urban Development Act 1993 process. Key points:
- At least two-thirds of the total flats must be held on long leases
- No more than 25% of the floor area may be used for non-residential purposes
- Leaseholders must serve an Initial Notice on the freeholder; the freeholder can only resist on limited grounds
- Leaseholders set up a Residents Management Company (RMC) to hold the freehold collectively
- Once the freehold is owned, the RMC can grant 999-year lease extensions at peppercorn ground rent to all participating leaseholders, and control service charges and managing agents
The premium for collective enfranchisement is calculated on the same basis as a lease extension, aggregated across all flats. Professional advice from specialist solicitors and surveyors is essential given the complexity.
The Leasehold and Freehold Reform Act 2024
This wide-ranging Act received Royal Assent in May 2024, shortly before the general election. Key changes (many requiring commencement orders before taking effect):
- Marriage value abolished: Once enacted, marriage value will no longer be payable on lease extensions for residential flats, making extensions cheaper for leaseholders with short leases
- Valuation changes: The valuation methodology for both lease extensions and enfranchisement is being reformed to use capitalisation rates set by regulation, making outcomes more predictable
- Standard lease extension term: The right to extend will increase to 990 years (from 90 years)
- Two-year ownership rule abolished: Leaseholders will no longer need to wait two years before extending or enfranchising
- Service charge transparency: Freeholders must provide more detailed service charge accounts and justifications; leaseholders gain stronger rights to challenge unreasonable charges
- Buildings insurance: Freeholders are restricted from profiting from buildings insurance commissions; leaseholders gain rights to arrange their own insurance
- No new leasehold houses: New houses cannot be sold on a leasehold basis (exceptions for certain shared ownership and estate management schemes)
- RTM expanded: Right to Manage extended to mixed-use buildings where residential use is at least 50% of floor area
The implementation timetable is complex. As of early 2026, the government has begun consultation on the secondary legislation needed to bring the valuation and marriage value changes into force. Leaseholders considering extending or enfranchising should take current professional advice on whether to act now or wait for the reformed regime.
Service Charges vs Ground Rent
It is important to distinguish between ground rent and service charges — they are entirely separate obligations:
| Feature | Ground Rent | Service Charge |
|---|---|---|
| What it pays for | Use of the land (no service provided) | Building maintenance, insurance, management, cleaning, communal areas |
| New leases (post June 2022) | Peppercorn / zero | Still charged — amount varies |
| Leaseholder challenge rights | Can challenge demand procedure only (unless post-2022) | Can challenge reasonableness at First-Tier Tribunal |
| Typical amount | £0 (new); £100–£500 (older leases) | £1,000 – £6,000+ per year for flats in managed buildings |
| Forfeiture risk if unpaid | Yes (if over £250 and over 3 years old) | Yes (if tribunal confirms amount is due) |
Right to Manage (RTM)
The Right to Manage allows qualifying leaseholders to take over management of their building without buying the freehold. RTM is exercised through a specially formed RTM Company. At least 50% of leaseholders in the building must join the RTM Company (though only 50% of all flats need to participate, not 50% of qualifying leaseholders).
RTM gives leaseholders:
- Control over choosing and appointing managing agents
- Control over major works and routine maintenance decisions
- Control over service charge spending (within lease obligations)
RTM does not give leaseholders the freehold, does not reduce ground rent on existing leases, and does not change the lease terms. However, it is a powerful and relatively low-cost way to improve building management quality. RTM was extended in 2024 to mixed-use buildings where at least 50% of the floor area is residential.
Commonhold: The Alternative to Leasehold
Commonhold is a form of property ownership designed as an alternative to leasehold for flats. Each flat owner holds their unit as freehold; a "commonhold association" (a company owned by all unit holders) owns the common parts and manages the building. There is no landlord, no ground rent, and no lease that runs down over time.
Commonhold was introduced in 2002 but has been virtually unused in England and Wales — fewer than 20 commonhold properties exist. The Leasehold and Freehold Reform Act 2024 contains provisions to reinvigorate commonhold, including making it the default tenure for new flats once commencement regulations are made. The government has stated its intention to abolish leasehold for new flats entirely in favour of commonhold, but the timeline remains uncertain.
Frequently Asked Questions — Ground Rent
Is ground rent banned in the UK?
New regulated residential leases in England and Wales granted on or after 30 June 2022 (1 April 2023 for retirement properties) must charge only a peppercorn (zero) ground rent, under the Leasehold Reform (Ground Rent) Act 2022. Existing leases signed before those dates are not retrospectively affected and can still charge ground rent if the original lease permitted it. Scotland has its own separate leasehold abolition legislation.
What is a doubling ground rent and why is it a problem?
A doubling ground rent is one that doubles at a fixed interval — typically every 10 years. A starting ground rent of £250 per year becomes £512,000 per year after 100 years. Even ignoring these extreme projections, doubling ground rents cause practical problems: mortgage lenders typically refuse to lend against properties where ground rent exceeds 0.1% of property value or includes a doubling clause, making such properties unsaleable. The CMA took action against several developers and freeholders and secured voluntary reductions.
How do I extend my lease in England?
Qualifying leaseholders can extend their lease by 90 years (plus unexpired term) with ground rent reduced to peppercorn under the 1993 Act. You must have owned the property for two years. Instruct a specialist leasehold solicitor and surveyor, serve a Section 42 Notice on the freeholder, and negotiate a premium. The Leasehold and Freehold Reform Act 2024 will extend the term to 990 years and remove the two-year ownership requirement once commenced.
What is the cost of extending a lease?
The cost depends on the unexpired term, property value, and ground rent. For a £250,000 flat with 90+ years remaining, expect to pay £3,000–£8,000. For leases below 80 years, marriage value is payable (50% of the uplift in property value from extension) and costs can rise to £20,000–£80,000 or more. Always get an independent surveyor's valuation before serving notice. Solicitor and surveyor fees (£2,000–£5,000) are additional.
What is collective enfranchisement?
Collective enfranchisement allows at least 50% of qualifying leaseholders in a block of flats to join together to purchase the freehold of the building. Once they own the freehold through a Residents Management Company, they can grant 999-year lease extensions to all participating leaseholders at zero ground rent and take full control of building management and service charges. The purchase price is calculated on the same statutory basis as a lease extension premium.
What does the Leasehold and Freehold Reform Act 2024 change?
The 2024 Act (once fully commenced) will: abolish marriage value for lease extension premiums (making short lease extensions much cheaper); extend the standard extension term to 990 years; remove the two-year ownership requirement for extensions and enfranchisement; strengthen service charge transparency; ban new leasehold houses; extend Right to Manage to mixed-use buildings; and restrict freeholder profits from buildings insurance commissions. Most provisions require separate commencement orders and are being phased in during 2025–2026.
What is Right to Manage and how do I use it?
Right to Manage (RTM) lets qualifying leaseholders take over day-to-day management of their building without buying the freehold. You need at least 50% of qualifying flat leaseholders to join an RTM Company. Serve a Claim Notice on the freeholder; if they do not contest it, RTM transfers automatically within one to three months. RTM gives you control over managing agents, maintenance decisions, and service charge spending, without requiring a purchase premium or proof of mismanagement.