Ground rent is a regular payment made by a leaseholder (the property owner) to the freeholder (the person who owns the building and land). It is a feature of leasehold ownership and is set out in the lease.
Ground rent after the Leasehold Reform (Ground Rent) Act 2022
The Act, which came into force on 30 June 2022, prohibits ground rent from being charged on new residential leases. New leases created from that date must have a "peppercorn" ground rent — effectively zero. This applies to lease extensions and new-build leasehold properties.
Ground rent on older (pre-2022) leases
If you're buying a property with a lease created before 30 June 2022, it may carry a ground rent. This could be:
- A fixed amount — for example, £250 per year for the life of the lease
- An escalating amount — increases at set intervals, typically linked to RPI or by fixed doubling clauses
Doubling clauses — the red flag
Some pre-2022 leases contain a clause where the ground rent doubles every 10 or 25 years. A £250 ground rent doubling every 10 years becomes £500 after 10 years, £1,000 after 20, £2,000 after 30, and so on. At this level:
- Many mortgage lenders refuse to lend
- The property becomes harder to sell
- Service charges may also escalate
Your solicitor will review the lease and flag any doubling or escalating ground rent clause. If a lender won't accept the ground rent terms, the purchase cannot proceed without renegotiation or a ground rent deed of variation.
Ground rent and mortgage eligibility
Lenders set maximum ground rent thresholds. Most require ground rent to be less than 0.1% of the property value per year. A property with an annual ground rent of £1,200 and a value of £200,000 has a ground rent ratio of 0.6% — likely unacceptable to most lenders.
This glossary entry is for general information. Always consult your solicitor for advice specific to your property.