Understanding ground rent for leasehold properties, what it is, how much it costs, when it's paid, and recent changes to ground rent rules.
•5 min read
Ground rent is a regular payment you make to the freeholder if you own a leasehold property. It's a fee for the right to live on the land, separate from your service charge and mortgage payments.
Ground rent is a historical concept that dates back centuries, but it's still a requirement for most leasehold properties today.
How much is ground rent?
Ground rent amounts vary, but typical rates are:
£50 to £500 per year - For most properties
Sometimes higher - Especially for newer properties
Sometimes "peppercorn" - A token amount (literally a peppercorn historically, now usually £0 or a very small amount)
The amount should be set out in your lease agreement. Some leases have fixed ground rent, while others have ground rent that increases over time.
When do I pay it?
Ground rent is usually paid:
Annually - As a single payment once a year
Half-yearly - Twice a year
Quarterly - Four times a year
The payment schedule will be in your lease. The freeholder (or their agent) will send you a bill when payment is due.
Why do I have to pay it?
Ground rent exists because:
You don't own the land - The freeholder owns the land, you own the right to live there
It's in your lease - It's a legal requirement under your leasehold agreement
Historical practice - It's a long-standing feature of leasehold ownership
Even though it may seem unfair, it's a contractual obligation you agreed to when you bought the property.
What if my ground rent increases?
Some leases have escalating ground rent clauses, where the amount increases:
Every 10 years - Common pattern
By a fixed amount - E.g., doubles every 10 years
By inflation - Increases with RPI or CPI
Escalating ground rent can become expensive over time. For example, if ground rent starts at £250 and doubles every 10 years, after 50 years it would be £8,000 per year.
This can make properties harder to sell and can affect mortgage eligibility.
Recent changes to ground rent
Recent legislation has changed ground rent rules:
For new leases (from June 2022):
Ground rent is capped at £0 - New residential leases can't charge more than a peppercorn
This applies to new properties - Not existing leases
For existing leases:
The rules haven't changed - You still pay what's in your lease
You may be able to extend your lease - Which can reduce ground rent to peppercorn
Check your lease - Understand what you're committed to
Can I reduce or remove ground rent?
You can reduce ground rent by:
Extending your lease - When you extend, ground rent reduces to peppercorn (virtually nothing)
Buying the freehold - If you own a house, you can buy the freehold
Negotiating with the freeholder - Though they're not obliged to agree
Extending your lease is the most common way to deal with high ground rent, but it costs money to do so.
What if I don't pay?
If you don't pay your ground rent:
You're in breach of your lease - This is a legal requirement
The freeholder can take action - They can pursue you for the money
In extreme cases, they could forfeit your lease - Though this is very rare and requires court action
It could affect your credit - Unpaid ground rent can be registered
Ground rent is a legal obligation, so you must pay it as specified in your lease.
How does it affect selling?
High or escalating ground rent can:
Put off buyers - Especially if it's set to increase significantly
Affect mortgage eligibility - Some lenders won't lend on properties with high ground rent
Reduce property value - Buyers may offer less to account for the ongoing cost
If you're selling and have high ground rent, you may need to:
Extend the lease first - To reduce ground rent to peppercorn
Be transparent - Disclose the ground rent situation to buyers
Price accordingly - Account for the ongoing cost in your asking price
Summary
Ground rent is a regular payment to the freeholder for the right to live on the land
Typical amounts are £50 to £500 per year, though some are higher
It's usually paid annually, half-yearly, or quarterly
Some leases have escalating ground rent that increases over time
For new leases from June 2022, ground rent is capped at £0 (peppercorn)
You can reduce ground rent by extending your lease or buying the freehold
High or escalating ground rent can affect property value and mortgage eligibility
You must pay ground rent as it's a legal requirement under your lease
Correct at time of writing, always check important information
