How does the Leasehold and Freehold Reform Act 2024 affect ground rent?

Full answer

The Leasehold and Freehold Reform Act 2024 received Royal Assent in May 2024, but its implementation is happening in stages, and it is important to be clear about what it does and does not currently do regarding ground rent on existing leases. **Ground rent on existing leases was NOT capped by the Act** Earlier drafts of the leasehold reform proposals considered capping existing ground rents at a nominal 'peppercorn' (effectively zero) level, which alarmed freeholders and pension funds holding ground rent income as an investment. This retrospective cap on existing leases was dropped from the final Act. A separate government consultation on capping onerous or escalating ground rents on existing leases has been running, but as of now no legislation has been enacted to reduce ground rent on leases that were already in place. **What the Act does change** The main practical changes for leaseholders relate to lease extensions and freehold purchases (enfranchisement): the Act extends the standard lease extension term from 90 years to 990 years for both houses and flats, removes the requirement to have owned the property for two years before extending, and crucially abolishes 'marriage value' -- the extra premium payable when a lease has fewer than 80 years remaining -- from the valuation calculation, which should make short-lease extensions significantly cheaper. **New-build ground rent** Separately, the Leasehold Reform (Ground Rent) Act 2022 already restricted ground rent on most new long residential leases granted after 30 June 2022 to a peppercorn (zero monetary value) rent, so newly built leasehold flats and houses since that date should not carry an escalating ground rent charge. **Commonhold as the long-term goal** The government has also signalled an intention to make commonhold (a form of ownership without a separate freeholder/landlord) the default tenure for new flats, effectively phasing out leasehold for new developments over time, though this requires further primary legislation. **Practical tip** If you own a leasehold property with escalating or high ground rent, check whether your lease qualifies for the improved (cheaper, 990-year) extension terms once the relevant sections of the 2024 Act are brought into force, and keep an eye on the ground rent consultation outcome as it could still affect existing leases in future.

Try the calculator

More answers

• How much does it cost to extend a lease under the 2024 Act?
• What is Right to Manage for leaseholders?