An end to troublesome residential ground rents

What homeowners and buyers need to know 

For years, some homeowners have found themselves stuck with a lease that makes their property hard, or even impossible, to sell. The issue usually comes down to one thing: ground rent that rises too fast. 

The government has now announced plans to tackle this problem. Here is what it means. 

What is ground rent? 

Ground rent is a yearly payment made by a leaseholder to the freeholder. It is separate from service charges, and unlike service charges, you do not receive services in return. 

Historically, ground rent was small, often just a few pounds a year. Over time, some developers introduced higher ground rents that increase regularly, sometimes doubling every 10 or 15 years. 

Why doubling ground rent causes problems 

A doubling clause means the ground rent increases at set intervals.  

For example: 

• £250 per year for the first 10 years  

• £500 for the next 10 years  

• £1,000 after 20 years  

• £2,000 after 30 years 

Even if the rent looks reasonable today, lenders do not just look at the present, they look at where the rent is heading and this is where the trouble starts. 

Why this affects selling and remortgaging 

Most buyers need a mortgage, even if a seller manages to find a cash buyer, so the fact it is not available to mortgage lenders, reduces the value and resale value. Many lenders are reluctant to lend on properties where ground rent rises quickly or becomes high compared to the value of the property. 

When lenders will not lend: 

• Buyers struggle to proceed 

• Sales are delayed or fall through 

• Sellers may be forced to reduce the price 

• Some homes become attractive only to cash buyers, reducing the price  

This is why some leaseholders have been described as trapped. 

What lenders usually look out for 

Each lender has its own rules, but common warning signs include: 

• Ground rent that doubles every 5, 10 or 15 years 

• Ground rent that becomes more than a small percentage of the property’s value 

• Very frequent review periods 

If a lender is unhappy, they may refuse the mortgage unless the lease is changed. That process can take time and cost money and there is no guarantee that the landlord who needs to play a part in the process, will engage with it.  

What often happens in real transactions 

A typical problem sale looks like this: 

1. An offer is accepted 

2. The buyer’s solicitor reviews the lease 

3. The ground rent clause is flagged 

4. The lender refuses the mortgage or reduces the valuation 

5. The parties must either change the lease, reduce the price, or walk away 

Fixing the issue can involve a deed of variation, a lease extension, or in some cases buying the freehold. None of these options are quick or inexpensive. 

What is changing now? 

New leases 

Since 2022, most new long residential leases must have no ground rent at all, only a peppercorn. 

Existing leases 

On 27th January 2026, the government published draft legislation proposing that: 

• Existing ground rents will be capped at £250 per year 

• After 40 years, the rent would reduce to a peppercorn 

• The changes could take effect from late 2028, if the law is passed 

This proposal is aimed directly at older leases with doubling or steeply increasing ground rents. 

What this could mean for homeowners 

If the proposed cap becomes law: 

• Many affected properties should become mortgage friendly again 

• Fewer sales should fall through because of ground rent issues 

• The need for costly lease changes may reduce 

It will not help immediately, and it is not guaranteed yet, but it is a significant step in the right direction for leaseholders and buyers.  

Practical tips if you are buying or selling now 

If you are buying 

• Ask for the ground rent terms in plain English 

• Check how much the rent will be in 10, 20 and 30 years 

• Be prepared for delays or extra costs if changes are needed, speak to your solicitor early if needs be and agree how you will approach the issue  

If you are selling 

• Expect buyers to ask detailed questions about ground rent, speak to your solicitor early and consider all the options available to you and whether an approach to the landlord is a good idea  

• Be open to discussions about lease changes 

• Price realistically if the clause remains in place 

Final thoughts 

Ground rent clauses that once seemed harmless have caused real difficulties for homeowners. While the law has not changed yet, the direction of travel is clear. 

If you are buying, selling, or remortgaging a leasehold property, understanding the ground rent early can save time, cost, and stress later. 

By Hannah Beko, Partner, gunnercooke 

If you would like to discuss your situation, contact Hannah Beko or Kamran Rahman  

This article gives general information only and is not intended to be legal advice. If you need advice about your situation, please contact us for a conversation.