The Ground Rent Act 2022 is a key milestone in the ongoing reform of leasehold property law in England and Wales. Designed to tackle the unfair financial burdens imposed by ground rent clauses in long leases, the Act primarily affects new leases — but it signals a broader trend in property law that may affect all leaseholders in time.
In this guide, we’ll break down what the Ground Rent Act does, who it applies to, and how it interacts with lease extensions, remortgages, and future property sales.
🧾 What Is Ground Rent?
Ground rent is a fee that leaseholders pay to the freeholder (landlord) as part of their lease. Traditionally, ground rent was a nominal sum (e.g. £10/year), but over time, many leases introduced:
- Escalating ground rents (e.g. doubling every 10 years)
- RPI-linked increases tied to inflation
- High starting ground rents that rise exponentially
These clauses caused:
- Mortgage refusals
- Drastically reduced property value
- Buyer hesitation
- Widespread public and political concern
⚖️ What Does the Ground Rent Act 2022 Do?
The Act abolishes ground rent for most new long residential leases in England and Wales.
✅ Key Provisions:
- For leases granted after 30 June 2022, the ground rent must be a peppercorn (£0).
- The Act applies to new residential long leases (21+ years).
- Freeholders who charge prohibited ground rent face financial penalties of up to £30,000 per breach.
- Administration charges relating to peppercorn ground rent are also prohibited.
📅 When Did the Act Take Effect?
- For standard leasehold flats and houses:
→ 30 June 2022 - For retirement properties:
→ 1 April 2023
🧍 Who Does the Act Apply To?
The Act applies to:
- New leases (new-build or newly granted long leases) from the effective dates.
- Voluntary lease extensions granted after the Act’s commencement.
The Act does not apply to:
- Existing leases granted before 30 June 2022.
- Statutory lease extensions under the Leasehold Reform Act 1993 (as those already reduce ground rent to zero).
- Transfers of lease ownership (e.g. resale of an existing flat).
🧠 What’s a Peppercorn Ground Rent?
A peppercorn is a legal term meaning “zero or nominal rent.” It dates back centuries — in this context, it means £0 ground rent is due. This is now the standard for all new qualifying leases.
🏡 What If I Have an Existing Lease with Ground Rent?
The Ground Rent Act won’t change your current lease, but you still have options:
1. Extend Your Lease Statutorily
- Reduces your ground rent to peppercorn (£0) permanently.
- Available to almost all leaseholders of flats.
- Now easier than ever due to the abolition of the 2-year ownership rule in 2025.
2. Negotiate Informally (Voluntary Extension)
- You may negotiate a new lease with the freeholder.
- The new lease must comply with the Act if granted after June 2022.
- Be careful — informal offers often still attempt to retain unfair terms. Always have a solicitor review these.
🔄 How Does the Act Affect Lease Extensions?
- Statutory lease extensions are already protected: under the 1993 Act, ground rent is always reduced to £0.
- Voluntary lease extensions, if granted after June 2022, must also reduce ground rent to zero — if they qualify under the Act.
This prevents freeholders from inserting new rent clauses under the guise of “voluntary” deals.
🧾 Example Scenario
David owns a leasehold flat with 88 years remaining and pays £250 ground rent, which doubles every 15 years.
He negotiates a voluntary lease extension in August 2023.
Under the Ground Rent Act 2022, the freeholder cannot impose ground rent in the new lease term.
Any clause attempting to do so is unenforceable, and the freeholder could face a fine.
💡 How the Act Signals Future Reform
The 2022 Act is seen as Phase 1 in wider leasehold reform. It:
- Demonstrates political intent to remove exploitative ground rent clauses entirely
- Builds momentum for further reform (e.g. marriage value abolition, commonhold)
Future legislation is expected to:
- Apply similar rent bans to existing leases
- Standardise lease extension processes and costs
❓ FAQs About the Ground Rent Act
Does it apply to shared ownership leases?
Partially — it only applies to the leased share. Shared ownership schemes often include rent on the unowned share, which is treated separately.
Can I ask my freeholder to vary my existing lease?
You can ask, but they are under no obligation to agree — and if they do, they may seek compensation.
🚫 Common Pitfalls
- Assuming the Act affects your current lease — it doesn’t unless you take formal action.
- Accepting informal offers with illegal ground rent clauses — these may be invalid, and you may have recourse through enforcement.
- Delaying action — rising ground rent still affects your lease’s value and mortgageability today.
📞 Need Help Reducing or Eliminating Ground Rent?
If your current lease includes high or doubling ground rent, a formal lease extension is still the best way to eliminate it.
Our team can:
- Value your lease extension premium
- Advise on statutory vs informal options
Liaise with freeholders and solicitors to protect your interests
