Ground Rent Explained

Many leaseholders have to pay ground rent. We look at what it is, its legalities and how it can impact your property’s value

What is ground rent?

Ground rent is a fee paid by a leaseholder to the freeholder for the right to occupy the land their property is built on. Ground rent is most commonly paid by leasehold flat owners but if you own a leasehold house you may need to pay it too.

Your lease will specify how much ground rent you must pay, the frequency of payments and how any future increases will be calculated.

What does the law say about ground rent?

• The Leasehold Reform (Ground Rent) Act 2022 banned ground rent on most new leases from 2022, setting it at a nominal ‘peppercorn’ rate i.e. £0. But this only applies to leases created after that date.
• For leases created before that date, if you were to carry out a statutory lease extension of your lease, your ground rent will also be reduced to a peppercorn, i.e. £0.

When will ground rent be abolished?

But ground rent still applies to existing leases. That means far too many leaseholders across the country struggle with punitive and escalating ground rents. Arguably you shouldn’t have to do an expensive lease extension to be able to set your ground rent to zero. The government accepts this, but abolishing ground rents seems a long way off. At the moment, the following proposals have been made:

• The proposed Leasehold and Commonhold Bill promises to tackle unregulated and unaffordable ground rents on existing leases as well as removing the threat of forfeiture if you are in arrears. But this bill is currently being drafted, it’s far from clear how this may work and any law change is some time off. For more on this and other leasehold reforms, read our guide on leasehold reform.
• In late 2023 the then government issued this consultation seeking views on capping the maximum ground rent that existing residential leaseholders can be required to pay in England and Wales. We have yet to hear the government’s response. 

It’s worth noting the Leasehold and Reform Act 2024 currently being implemented by government does not include any changes to how ground rent is calculated.

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Who pays ground rent and when

Leaseholders usually pay ground rent to the freeholder on an annual basis, although the payment frequency will be outlined in the lease. As a leaseholder, you’ll usually receive a demand notice from your freeholder setting out how much you owe and the date the payment is due.

It’s vital to pay on time to avoid late fees or legal action. The most serious consequence of not paying ground rent is ultimately forfeiture of the lease. This means that if you don’t pay your ground rent the landlord can apply to repossess your flat. This is clearly unfair and over the top for someone who hasn’t paid a small bill. For example, the Leasehold Knowledge Partnership has reported a case of a woman in east London had her £165,000 flat forfeited over what began as £290 owed in ground rent.

How much is ground rent?

Leaseholders pay an average annual ground rent of £298, according to the government’s latest English Housing Survey. But ground rents can vary wildly from as low as £10 per year to sky high amounts. In cases where ground rent is deemed onerous, such as doubling every 5 or 10 years, it can make it hard to sell the property or remortgage. Read on for more on this.

The terms of your lease will guide the calculation of ground rent. The lease will specify the initial ground rent level, payment frequency and whether it’s fixed or will increase over time.

How ground rent affects property value

The amount of ground rent payable can have significant impact on a property’s value: if the property is deemed to have onerous ground rent terms, i.e. terms that are disproportionately high or burdensome, it can severely impact the property’s resale value and ability to get a mortgage on it.

HomeOwners Alliance Chief Executive Paula Higgins told The Telegraph in March 2025, ‘What once seemed reasonable has become toxic under high inflation, trapping hard-working homeowners in unsellable properties’.

Some key characteristics of onerous ground rents include: high initial charges, frequent and escalating increases and complex and unclear terms.

Here are some of the ways ground rent can cause problems when you want to sell or remortgage a house:

1. Ground rent is more than 0.1% of the property value

If ground rent is more than 0.1% of the property’s value (for example £200 per year on a £200,000 flat), lenders may be reluctant to lend. Or some lenders may lend up to 0.2% of the property’s value.

2. Ground rent increases too frequently

The frequency of ground rent increases also affects whether a mortgage lender will lend on a property – thereby affecting your ability to sell or remortgage. Propertymark research on the impact of ground rents on the property market, found 78% of members reported that a leasehold property with an escalating ground rent will struggle to sell, even if priced correctly.

However, what a lender is willing to accept may depend on how any increases are calculated. For example, a lender may accept ground rent increases every 5 years if it’s linked to inflation. But a lender may not accept increases more frequently than 20 years (or more) if ground rent will double.

3. How ground rent increases are calculated

Nearly one million leases have escalating ground rents, according to the Competition and Markets Authority (CMA), meaning the annual charge increases over time. How any ground rent increases are calculated can have an impact on saleability of a property and whether you can get a mortgage on it:

• Ground rent is fixed and won’t change throughout the lease term. This is usually the most straightforward. Although if the amount is set at an onerous level, you may wish to extend your lease to set your ground rent to £0.
• Ground rent will increase at intervals and amounts set in the term. How a lender views this will depend on the terms. For example, if ground rent is set to double every 5 or 10 years, you’ll almost certainly have difficulty selling or remortgaging.
• Ground rent will increase by the Retail Price Index (RPI). Some lenders may view this as acceptable. However, mortgage lenders have become increasingly wary of increases linked to RPI due to the high level of inflation the UK has experienced in recent years. For example, if ground rent was set at £290 in January 2020, an RPI-linked increase would take it to £391 this year. This is a 35% increase in 5 years, hence lenders being wary. 
• Ground rent is based on the value of the property, known as ‘capital value linked ground rent’. The lender will look at the detail of this when deciding whether or not to lend. However, some lenders will not lend if this clause is in the lease.
• Problems with non-standard increases. Problems can also arise when ground rent increases in line with something else, such as a different index or by agreement with the freeholder.

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Should I buy a flat with a ground rent over £250?

Ground rent that is above £250, or £1,000 in London, can cause serious issues for leaseholders. This is because it might be possible for your lease to be treated as an Assured Shorthold Tenancy under the Housing Act 1988. This can make it easier for your freeholder to repossess your flat if you are in ground rent arrears.

As a result, these properties can be difficult to sell or remortgage as lenders are hesitant to lend due to the potential risk of losing their security against the property.

Ground rent problems – our view

Paula Higgins, Chief Executive of HomeOwners Alliance, says, ‘Over the last 20 years, we’ve seen ground rents escalating as it became increasingly seen as a lucrative income stream for investors at the expense of homeowners.

‘In March 2024, the Competition and Markets Authority (CMA) said it had a “particular concern with so-called ‘modern leaseholds’ that emerged in the 2000s, where ground rent often doubled periodically or increased by RPI in leases that normally lasted for 125 years or more, notwithstanding that a substantial premium had been paid on purchase. In those leases ground rent was neither legally necessary nor did we see any persuasive evidence that it was commercially necessary. In fact we heard no convincing justification for the payment of any ground rent in modern leaseholds.” We couldn’t agree more.

‘While we welcomed the banning of ground rent on most new leases in 2022 and we are hopeful that ground rent reform is on its way under the Leasehold and Commonhold bill, it’s far from clear how this will work and we believe more needs to be done. We’ll continue to call for change as part of our campaign for leasehold form.’

How can I reduce or remove my ground rent?

There are two ways you can do this:

1. Deed of variation

You can ask your freeholder for a ‘Deed of Variation’, which is sometimes referred to as Ground Rent Variation. These usually reduce your ground rent, cap it at a certain level or change the way it increases.

Pros of a Deed of Variation

• Speed. You may be able to reduce your ground rent quickly using a deed of Variation.

Cons of a Deed of Variation

• Your freeholder could refuse or want to charge a large fee to change your ground rent.
• Unless you reduce it to £0 you could spend thousands of pounds and still have the risk of problems in the future.
• The freeholder may add in new charges and restrictions into your lease at the same time. This is similar to the risks you can face with an informal lease extension.

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2. Statutory lease extension – Buying out ground rent.

Your other option is to use your legal right to a lease extension – this process also results in you buying out your ground rent.

Pros of a statutory lease extension

• When you extend your lease, your ground rent will be reduced to a peppercorn – i.e. nothing. You’ll have the confidence that it will never be an issue again.
• It can be be relatively affordable if the lease is long. Read our guide on Lease extension costs.
• By extending a short lease, it should make your property more saleable and valuable.

Cons of a statutory lease extension

• The lease extension process normally takes from 3 to 12 months. Although it can be made quicker by efficient valuers, solicitors and other professional help, so choose these people wisely.
• Extending your lease can be expensive, especially if it’s below 80 years because at this point “marriage value” kicks in. This means you must pay half of the amount the property will increase in value by due to the longer lease. Marriage value is set to be abolished under leasehold reform. However, we don’t yet know when this will take effect. Stay up to date with our guide on Leasehold Reform.

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Mortgage declined due to ground rent

If this has happened to you, your next steps depend on whether you’re planning to buy the property or you want to remortgage a property you already own.

1. Mortgage declined on a property I want to buy

If you’re planning to buy a leasehold flat but your mortgage on it is declined due to issues with the ground rent terms in the lease, this is a major concern. Even if you can find another mortgage lender willing to lend on the flat, you must consider any problems you may have in the future when trying to remortgage or sell.

If you still want to pursue buying the flat, you can:

• Ask the current owner to extend the lease. It’s more straight forward if the seller extends the lease first, then sells to you. Although complicated, it is also possible to do this as part of the buying and selling transaction.
• Negotiate a lower price: Assuming you can fund the purchase, you could negotiate a lower sale price to cover the cost of extending the lease yourself once you’ve bought it.

2. Remortgage declined

If you already own the property and a remortgage is declined due to ground rent, in the first instance speak to a fee-free mortgage broker to see if it’s likely that another lender will lend to you. If not, you may wish to extend your lease.

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Mortgage lenders and ground rents: What are the rules?

Each lender has different lending criteria including regarding ground rent. This criteria is set out in the UK Finance Mortgage Lenders’ Handbook for Conveyancers. For example:

Ground rent and mortgages: An expert’s view

David Hollingworth, of fee-free mortgage brokers L&C, explains, ‘Lenders will have general guidelines around what clauses are likely to be acceptable. The valuation could pick up on an onerous ground rent which would affect the lender’s security and so could result in a decline by the mortgage lender.’

In some cases, borrowers are choosing to use a product transfer rather than remortgaging with a different lender to avoid the requirement of the property to be valued.

Shared ownership ground rent rules

• Ground rent isn’t usually payable on a shared ownership lease until after the final staircasing, says the Leasehold Advisory Service. It may state in the lease that ground rent is payable once the leaseholder owns 100%.
• Under the Leasehold Reform Act, which is now law but has yet to come fully into effect, leaseholders can extend their lease by 990 years at a peppercorn (i.e. zero) ground rent.
• However, shared ownership leaseholders with at least 150 years to run will have the right to ‘buy out’ their ground rent without having to extend their lease at the same time.

Service charge vs ground rent

If you own a leasehold property, you’ll usually have to pay service charge on top of any ground rent. Read more in our guide Leasehold property: Service charge problems. While if you live in a new build estate you may need to pay additional fees on top. Read our guide on New build estate management fees explained.

Frequently asked questions