What is ground rent, and can my freeholder increase it?

A payment to the freeholder that buys you nothing in services. Why most new leases no longer have one, what makes an old one a problem, and what to do about an escalating clause.

Difficulty: intermediate
Time: 10 min
Read: 5 min

Short answer

Ground rent is rent for the land, separate from the service charge and buying no services. Reform in 2022 reduced ground rent to a peppercorn — effectively nothing — on most new residential long leases in England and Wales, and banned charging a fee to collect it. Existing leases keep whatever they say, and a doubling or index-linked clause can make a flat difficult to mortgage or sell.

Ground rent became a national issue because of a specific practice: leases sold on new estates with rents that doubled at fixed intervals, which compounds into figures that make a property unsellable within a few decades. Reform stopped it for new leases and left millions of existing ones in place, which is why the question 'what does my lease actually say' is the whole of the answer for anyone already in one.

Step by step

Find the clause in the lease.Ground rent is set out in the lease, with the amount and the review mechanism. Look for the review interval, the basis — a fixed increase, a doubling, or a link to an index — and any cap.
Work out where it goes over time.Project the rent forward to the end of the term using the clause. A doubling every ten or fifteen years produces very large numbers within a lifetime, which is what lenders react to.
Distinguish it from the service charge.Service charge pays for insurance, maintenance and management of the building. Ground rent buys nothing. They are demanded separately and have different rules — service charges can be challenged as unreasonable; ground rent generally cannot, because it is what the lease says.
Know the position on new leases.For most residential long leases granted from mid-2022 in England and Wales, ground rent is limited to a peppercorn, and a landlord cannot charge a fee for collecting a restricted ground rent. That is why a new lease and an old one can look completely different.
Check the demand is valid before paying.A ground rent demand must be in the prescribed form and served correctly, and the landlord must have given you their name and address. An invalid demand does not create an obligation to pay on that date.
Never simply stop paying.Unpaid ground rent, like unpaid service charge, can in principle put a lease at risk. Where you dispute a demand, pay under protest or take advice, and do not let arrears build.
Deal with an onerous clause when you extend or enfranchise.A statutory lease extension reduces the ground rent to a peppercorn for the extended term, and buying the freehold removes it altogether. Those are the reliable routes for an existing onerous rent.
Check whether a voluntary scheme applies.Some developers and freeholders agreed to convert doubling clauses following regulatory action. Ask your freeholder in writing whether your lease is covered by any such undertaking.
Raise it before you buy, not after.For a purchase, the ground rent clause should be reported on by your conveyancer and checked against your lender's requirements. Some lenders decline leases with particular clauses outright.
Northern Ireland: ask about ground rent redemption.Northern Ireland has its own scheme allowing ground rent on a dwelling to be redeemed. It is a different system from England and Wales and needs Northern Ireland advice.

Tips

Project the rent to the end of the term on paper. It takes five minutes and it is what a lender's underwriter does.
Keep every ground rent demand. Whether a demand was validly served decides whether arrears are owed.
If the clause is onerous, price a statutory lease extension. It reduces the rent to a peppercorn and solves the lease length at the same time.

Common mistakes

Confusing ground rent with the service charge — They have different rules, different remedies and different consequences. Ground rent cannot generally be challenged as unreasonable; service charges can.
Ignoring a small ground rent with a doubling clause — The problem is not the amount today, it is the projection. Lenders look at where it ends, not where it starts.

If it doesn't work

A lender has declined the flat because of the ground rent

Cause: A doubling or escalating clause outside their criteria — Fix: Ask a broker which lenders accept the clause, and ask the freeholder whether they will grant a deed of variation. A statutory lease extension also reduces it to a peppercorn.

You have received arrears demands with fees added

Cause: Administration charges for late payment — Fix: Administration charges must be reasonable and can be challenged at the First-tier Tribunal. Ask for the breakdown and the clause relied on before paying anything beyond the rent itself.

You have never received a demand and now owe several years

Cause: Demands not served, or served to an old address — Fix: Ground rent is only payable when properly demanded. Ask for copies of the demands and check the form and the service. Take advice before paying a large backdated claim.

Questions people ask

Can I refuse to pay ground rent?

Not safely. It is a term of the lease, and non-payment can put the lease at risk. If a demand is invalid, say so in writing and take advice rather than simply not paying.

Can ground rent be challenged as unreasonable?

Generally no, because it is a contractual sum rather than a charge for services. Service charges and administration charges can be challenged at the tribunal; ground rent is a different animal.

Does my lease qualify for the peppercorn rule?

The restriction applies to most residential long leases granted from mid-2022. A lease granted before then, or a lease extension of an older lease outside the statutory route, may not. Ask your conveyancer.

Will reform remove ground rent from existing leases?

Reform of existing leases has been the subject of consultation and legislation with staged commencement, and the position has not settled. Check the Leasehold Advisory Service for what is currently in force rather than relying on a news article.