Answers · UK 2025/26

What is ground rent and do I still have to pay it on a new lease?

Ground rent is a periodic charge a leaseholder pays to the freeholder simply for occupying the land, separate from any service charge for building maintenance -- reforms mean most NEW long residential leases granted since mid-2022 must have ground rent set at a peppercorn (effectively zero), though many existing older leases still carry real, sometimes escalating, ground rent charges.

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Ground rent has been a source of significant leasehold controversy in recent years, particularly where older leases included escalating clauses that made some properties difficult to sell or mortgage, prompting legislative reform for new leases. **What ground rent actually pays for** Ground rent is a charge paid to the freeholder purely for the right to occupy the land under the lease -- unlike a service charge, it is not tied to any specific maintenance, insurance, or management service provided in return; historically it was often a nominal, symbolic amount, though from roughly the 1990s onwards many developers began setting meaningful and sometimes automatically escalating ground rents. **Peppercorn ground rent on new leases** Following leasehold reform legislation, most new long residential leases (generally 21 years or more) granted from mid-2022 onwards must be set at a 'peppercorn' rent -- meaning effectively zero financial ground rent can be charged, addressing the specific problem of new leases carrying meaningful or escalating ground rent charges going forward. **Existing leases are not automatically changed** Critically, this reform applies to NEW leases granted after the relevant date -- it does not automatically reduce or remove ground rent on EXISTING leases already in place, meaning many leaseholders with older leases (particularly those granted with doubling or RPI-linked escalation clauses) may still be liable for real and sometimes significantly rising ground rent under their current lease terms. **Escalating and 'doubling' ground rent clauses** Some older leases, particularly from certain new-build developments in the 2000s-2010s, included ground rent that doubled every 10 or 25 years, or rose in line with RPI inflation -- these clauses attracted significant criticism because they could make properties very hard to sell or remortgage as the ground rent became disproportionate to the property's value, and separate remediation schemes and legal challenges have targeted the worst examples. **Worked example** A flat has an existing lease from 2010 with ground rent starting at £250 a year, doubling every 25 years. A prospective buyer's mortgage lender may flag this escalating clause during the mortgage application, potentially restricting available lenders or requiring the ground rent to be varied/capped before lending -- compare this with a new-build flat sold on a lease granted after the reform, which would have a peppercorn (effectively nil) ground rent with no such issue. **Practical tip** Before buying any leasehold property, check the exact ground rent amount, whether and how it increases over the lease term, and confirm this against your intended lender's criteria (some lenders will not lend on leases with certain escalation clauses), since this single lease term can materially affect both mortgageability and future resale value.