Leasehold Reform 2024/2026: What It Means for Ground Rent and Property Values

What Is Ground Rent and Why Did It Become Controversial?

Ground rent is an annual charge paid by a leaseholder to the freeholder simply for occupying the land on which the property sits. In theory it is a historic feature of the leasehold tenure system, dating back centuries. In practice, over recent decades it became a significant and controversial revenue stream for property developers and freeholders.

The problem was not ground rent itself at a few pounds a year -- it was the clauses that allowed ground rent to escalate. Many leases sold in the 1990s, 2000s and 2010s included doubling clauses: the ground rent would double every ten or twenty-five years. A ground rent of £250 per year that doubles every ten years becomes £500 after a decade, £1,000 after two, and £16,000 after sixty years. On a long leasehold property, that is a significant liability.

Mortgage lenders became increasingly aware of these clauses. Most major lenders began refusing to lend on properties where the ground rent exceeded 0.1% of the property value, or where the lease contained doubling clauses or clauses linking ground rent to the retail price index. This made some leasehold flats effectively unmortgageable and therefore very difficult to sell.

The Leasehold and Freehold Reform Act 2024

After years of campaigning by leaseholder groups and parliamentary pressure, the Leasehold and Freehold Reform Act 2024 was passed and received Royal Assent in May 2024. It introduced several important changes, though the implementation of individual provisions has been phased.

Ground rent ban on new leases. The Act effectively requires that new residential long leases are granted at a peppercorn -- meaning zero -- ground rent. Developers can no longer charge meaningful ground rent on new-build flats or houses sold on a leasehold basis. This is the most significant structural change for future buyers.

Lease extension improvements. Previously, leaseholders had to own their property for two years before they could apply to extend their lease under the statutory route. The Act removed this qualifying period, allowing new buyers to begin the extension process immediately. The maximum lease extension for flats was already ninety years on top of the remaining term, and this was maintained.

Service charge transparency. The Act introduced new rules requiring freeholders and managing agents to provide clearer, more standardised accounts of service charges. Leaseholders also gained enhanced rights to challenge unreasonable charges at the First-tier Tribunal.

Right to Manage extensions. The Right to Manage -- which allows leaseholders to take control of the management of their building without buying the freehold -- was extended to cover more types of buildings, including some mixed-use blocks with commercial ground floor units.

Who Does Not Benefit

The reforms are largely prospective. They protect future leaseholders from having ground rent imposed on new leases, but they do not retrospectively change the terms of existing leases. If you purchased a flat in 2008 with a £500 ground rent that doubles every ten years, your lease still says exactly that.

Existing leaseholders with problematic ground rent clauses have several options, but none are cost-free:

• Statutory lease extension. You can extend your lease under the Leasehold Reform Housing and Urban Development Act 1993. The extension adds ninety years to the remaining term and reduces the ground rent to a peppercorn going forward. You pay a premium to the freeholder, calculated using a statutory formula that accounts for the property value, the remaining lease term, and the existing ground rent.
• Voluntary negotiation. Some freeholders will negotiate a deed of variation to cap or eliminate ground rent in exchange for a lump sum, particularly if they are under pressure from lenders or if it helps them sell the freehold to a third party.
• Collective enfranchisement. Leaseholders in a building can collectively purchase the freehold, removing the freeholder from the picture entirely. This is complex and expensive but can be worthwhile for buildings where the majority of residents want to do it.

Impact on Property Values and Mortgageability

For buyers considering leasehold properties, ground rent clauses remain a key due diligence item. Even with the 2024 reforms, thousands of existing properties carry the old-style escalating ground rent terms. Before making an offer on a leasehold flat, check:

• The current ground rent and how it escalates
• The remaining lease term (anything below eighty years starts to attract a marriage value premium on extension)
• Whether your intended mortgage lender has a policy on ground rent

The two issues are connected. A property with a doubling ground rent starting at £250 may look affordable but could be difficult to sell to a buyer using a standard mortgage lender in future. This affects the property's resale value even if you can buy it easily today.

Lease Extension Costs -- A Rough Guide

The cost of a statutory lease extension varies enormously. A rough rule of thumb is that the shorter the remaining lease, the more expensive the extension premium. Leases below eighty years typically require payment of "marriage value" -- a share of the increase in property value that results from having a longer lease. This can substantially increase the cost.

For a flat worth £300,000 with a lease of eighty-five years remaining, the premium might be in the range of £5,000 to £15,000, depending on ground rent and other factors. For a flat with fifty-five years remaining, the premium could be £30,000 to £60,000 or more. You will also pay your own legal fees and a valuer's fee, plus the freeholder's reasonable legal and valuation costs.

When calculating the true cost of buying a leasehold property, factor in the likely cost of a lease extension if the term is below ninety years. Use our

to model what your monthly payments would look like, and our to check your upfront tax liability on the purchase.

Looking Ahead

The 2024 reforms represent meaningful progress for leaseholders, particularly buyers of newly-built properties who will no longer face ground rent from day one. However, the leasehold system itself remains complex, and many commentators argue that England and Wales should move toward a commonhold system -- where flat owners hold their property outright and collectively own the building -- as is standard in most of Europe.

Commonhold reforms have been discussed for decades and the government has indicated intent to promote commonhold as the default for new flats. Whether that becomes a practical reality for most buyers in the near term remains to be seen. For now, any leasehold buyer should do their homework carefully before committing to purchase.