Ground Rent

Ground rent is an annual sum payable by the leaseholder to the freeholder under the terms of the lease. It is separate from service charges and insurance costs. Ground rent is not charged for services rendered — it is rent payable for occupation of the land on which the building stands. The freeholder receives it as income; it does not cover any building costs.

Under leases granted before 30 June 2022, ground rent may be a substantial financial sum, and many such leases contain escalation clauses providing for increases at set intervals. The Leasehold Reform (Ground Rent) Act 2022 abolished financial ground rent for most new regulated residential leases. The position for existing leases is different and is covered below.

The 2022 Peppercorn Cap

The Leasehold Reform (Ground Rent) Act 2022 restricts the ground rent on regulated leases to a peppercorn — effectively zero. It applies to most new residential long leases in England and Wales from 30 June 2022, and to retirement housing leases from 1 April 2023. A regulated lease is broadly any new residential long lease (originally granted for a term exceeding 21 years) falling within the scope of the Act.

Any financial ground rent demanded on a regulated lease is a prohibited rent. A leaseholder is not required to pay a prohibited rent. A landlord who demands a prohibited rent from a leaseholder commits a civil offence and may be subject to a financial penalty of between £500 and £30,000, enforceable by a local weights and measures authority. The Act does not affect leases granted before 30 June 2022 — those leases continue to be governed by their own terms.

Existing Leases: The Current Position

For leases granted before 30 June 2022, the ground rent provisions of the lease remain in force. If the lease specifies a financial ground rent, the leaseholder remains liable to pay it on the terms of the lease, including any escalation clauses providing for future increases. The 2022 Act provides no relief for existing leases.

The position on mortgage-ability is a practical concern. Some lenders apply policies that restrict or refuse lending where ground rent exceeds a certain threshold relative to the property value (commonly 0.1% per annum), or where the lease contains a doubling clause. A property with an escalating ground rent may become difficult to sell or remortgage if the rent is at or approaching a lender's threshold.

A cap on ground rents for existing residential leases — at £250 per year, reducing to a peppercorn after 40 years — is proposed in the draft Commonhold and Leasehold Reform Bill (published January 2026). This measure is not yet law. It is subject to parliamentary approval; if enacted, the government's initial estimate placed commencement in late 2028, with reports of pressure to bring this forward to late 2027. See the Reform Tracker for current status.

Escalation Clauses

Many leases granted between the 1980s and 2010s contain ground rent escalation clauses. Common types include doubling clauses, under which the ground rent doubles at set intervals (typically every 10 or 25 years); RPI-linked clauses, under which the rent increases in line with the Retail Prices Index; and fixed review clauses, under which the rent increases to a specified sum at specified dates.

Doubling clauses in particular caused significant problems. A ground rent that doubles every 10 years reaches very large sums over the course of a long lease. Some mortgage lenders refused to lend on properties with such clauses, and properties became difficult to sell. Following a Competition and Markets Authority investigation and enforcement action in 2020–2021, several major developers and freeholders gave undertakings to replace doubling clauses with RPI-linked alternatives in affected leases. These undertakings were given voluntarily and do not apply to all leases or all freeholders. A leaseholder affected by a doubling clause should check whether the freeholder made any relevant commitment and, if so, whether it covers their lease.

Ground Rent and Forfeiture

A landlord may not commence forfeiture proceedings in respect of a failure to pay ground rent unless the ground rent exceeds £350 per annum in Greater London, or £250 per annum elsewhere, or the ground rent is more than three years in arrears. These thresholds are set by section 167 of the Commonhold and Leasehold Reform Act 2002. A ground rent below these thresholds cannot be used as a basis for forfeiture.

Ground rent may only be demanded by a valid notice served on the leaseholder under section 166 of the Commonhold and Leasehold Reform Act 2002. The notice must state the amount due, the period to which it relates, and the date on which it became due. The leaseholder must be given not less than 30 days and not more than 60 days to pay. A demand that does not comply with these requirements is not a valid demand. No ground rent is due until a valid notice has been served. A leaseholder who has not received a valid section 166 notice is not in arrears regardless of when the rent was due to fall under the lease.

Where a landlord does commence forfeiture proceedings, the leaseholder's mortgage lender — if any — must be notified. Lenders may apply to the court for relief from forfeiture on the leaseholder's behalf. Forfeiture of a residential lease for arrears of rent is a drastic remedy that courts apply with caution.

What to Do with an Escalating Ground Rent

Several options are available to a leaseholder with a problematic ground rent, depending on the lease terms and the landlord's willingness to negotiate. These are documented here as options; which applies in a given case depends on the specific lease and circumstances.

A leaseholder may approach the freeholder directly to negotiate conversion of the ground rent to a peppercorn or to a less onerous provision. Some freeholders agree to this, typically in exchange of a one-off payment. There is no statutory obligation on the freeholder to agree.

A statutory lease extension under the Leasehold Reform, Housing and Urban Development Act 1993 includes the right to have the ground rent reduced to a peppercorn for the extended term of the new lease. The existing ground rent continues to run until the extension takes effect. The extension resolves the ground rent for the future but not for any remaining years under the current lease. See LHF/08 — Lease Extensions.

Collective enfranchisement — the purchase of the freehold by a qualifying group of leaseholders — removes the ground rent entirely. As the freeholder, there is no landlord to pay ground rent to. See LHF/11 — Collective Enfranchisement.

The proposed ground rent cap in the draft Commonhold and Leasehold Reform Bill is not yet law. It cannot be relied upon at present. A leaseholder who needs to resolve a ground rent issue cannot wait on legislation that may not come into force for several years.