Ground Rent Abolition: What the 2022 Act Means for Leaseholders
Has ground rent been abolished? This guide explains what the Leasehold Reform (Ground Rent) Act 2022 actually does, who is affected, what peppercorn ground rent means, and what options you have if you are still paying ground rent charges on an existing lease.
The Leasehold Reform (Ground Rent) Act 2022
The Leasehold Reform (Ground Rent) Act 2022 is the most significant piece of legislation addressing ground rent abolition in England and Wales. The Act received Royal Assent on 8 February 2022 and came into force on 30 June 2022 for most residential long leases. For retirement home leases, the Act came into force on 1 April 2023. Its central purpose is to restrict ground rent on new qualifying leases to one peppercorn per year, which has no financial value.
In practical terms, this means that any new residential long lease granted on or after 30 June 2022 cannot require the leaseholder to pay more than a peppercorn as ground rent. The Act applies to leases of dwellings granted for a term of more than 21 years at a premium. It covers new-build flats, new-build houses sold on a leasehold basis, and voluntary lease extensions agreed outside the statutory process. The Act makes it a civil offence for a landlord to demand or collect ground rent above a peppercorn on a qualifying new lease.
The question when will ground rent be abolished is one that many leaseholders continue to ask. The answer is that ground rent abolished provisions are already in effect for new leases, but the Act does not apply retrospectively to existing leases. For a broader overview of how ground rent works, including how it is calculated and collected, see our comprehensive ground rent guide.
Who Is Affected by Ground Rent Abolition?
The distinction between new leases and existing leases is central to understanding who benefits from ground rent abolition. The Act draws a clear line at 30 June 2022. If your lease was granted on or after that date, your ground rent must be a peppercorn. If your lease was granted before that date, the ground rent clause in your lease remains enforceable, regardless of the amount.
New Leases (On or After 30 June 2022)
If you purchased a new-build leasehold property or were granted a new lease on or after 30 June 2022, your ground rent is restricted to a peppercorn. This also applies to statutory lease extensions completed after the Act came into force, as the lease extension process now results in a peppercorn ground rent by law. You should not be paying any financial ground rent on these leases.
Existing Leases (Before 30 June 2022)
If your lease was granted before 30 June 2022, the 2022 Act does not change your ground rent obligations. You must continue to pay the ground rent specified in your lease, including any escalation provisions such as doubling clauses or RPI-linked increases. The freeholder or their managing agent remains entitled to demand and collect the full ground rent charges set out in your lease. To understand your full rights as a leaseholder on an existing lease, visit our leaseholder rights guide.
Is ground rent now illegal? No. Ground rent is not illegal on existing leases. The 2022 Act only makes it unlawful to charge more than a peppercorn on new qualifying leases. Leaseholders on pre-2022 leases should not assume that the Act has removed their obligation to pay ground rent.
Peppercorn Ground Rent Explained
A peppercorn ground rent is a nominal rent with no financial value. The term originates from English common law, where a single peppercorn was sometimes specified as a token payment to satisfy the legal requirement for consideration in a contract. In the context of the 2022 Act, peppercorn ground rent means that the leaseholder's obligation to pay ground rent is effectively zero. No money changes hands, and the freeholder cannot demand any financial payment as ground rent.
The shift to peppercorn ground rent for new leases was a direct response to widespread criticism of escalating ground rent charges that left many leaseholders facing unaffordable payments and unsellable properties. By setting ground rent at a peppercorn, the Act removes the financial burden entirely for new leaseholders and eliminates the risk of escalating clauses.
For leaseholders who extend their lease through the statutory process, the extended term is also granted at a peppercorn ground rent. This makes lease extension one of the most effective ways for existing leaseholders to eliminate their ground rent obligation entirely.
What About Existing Leases?
The 2022 Act does not help the millions of leaseholders who are already paying ground rent under leases granted before 30 June 2022. Many of these leases contain escalation provisions that cause ground rent charges to increase significantly over time. Understanding the type of escalation clause in your lease is essential for assessing your long-term costs and your options for reducing or eliminating the ground rent.
Doubling Clauses
Is it normal for ground rent to double every 25 years? Doubling clauses were included in many leases granted during the 1990s and 2000s. While they were legal at the time, they are now regarded as onerous and unfair. A ground rent starting at 200 pounds that doubles every 25 years would reach 400 pounds after 25 years, 800 pounds after 50 years, and 1,600 pounds after 75 years. Some leases contain clauses that double every 10 or 15 years, producing even more extreme results.
RPI-Linked Clauses
Leases that link ground rent increases to the Retail Prices Index (RPI) produce more gradual escalation than doubling clauses, but the increases are unpredictable and compound over time. Depending on inflation, an RPI-linked ground rent could more than triple over a 50-year period. These clauses make it difficult for leaseholders to plan for future costs and can affect the saleability of the property.
The 250 Pound Threshold
Escalating ground rent charges become particularly dangerous when they cross the 250 pound per year threshold in England (or 1,000 pounds in London). At this level, the lease may be classified as an assured shorthold tenancy under the Housing Act 1988, giving the freeholder potential forfeiture rights if the ground rent goes unpaid. This means that unpaid ground rent above 250 pounds could, in the worst case, lead to the loss of your home. Leaseholders with escalating clauses should check whether their ground rent has reached or is approaching this critical threshold.
If your existing lease contains any of these escalation provisions, you should seek advice about your options. Our ground rent management team can review your lease and explain the steps available to you.
Government Plans for Existing Leases
The government has acknowledged that the 2022 Act was only the first step in ground rent abolition and that further reform is needed to address the position of existing leaseholders. The Leasehold and Freehold Reform Act 2024 signalled the government's intention to make it cheaper and easier for leaseholders to extend their lease or buy their freehold, but it did not cap or abolish ground rent on existing leases.
Government consultations have explored the possibility of capping existing ground rent charges at a peppercorn or at a fixed monetary amount, but no legislation has been enacted to do so. The complexity of retrospective reform is significant, as it involves interfering with existing contractual rights and raises questions about compensation for freeholders who would lose income. For a broader overview of upcoming changes, see our leasehold reform guide.
Until further legislation is passed, leaseholders on existing leases should not assume that their ground rent will be abolished automatically. The most reliable way to eliminate your ground rent today is to take action yourself through one of the routes outlined in the next section.
How to Reduce Your Ground Rent Now
If you are paying ground rent on an existing lease and want to reduce or eliminate it, there are three main routes available to you. Each has different costs, timescales, and implications, and the best option depends on your individual circumstances.
Lease Extension
A statutory lease extension is the most common way to eliminate ground rent. Under the current law, a qualifying leaseholder can extend their lease by 90 years (for flats) at a peppercorn ground rent. This means that once you complete a statutory lease extension, you will pay no financial ground rent for the remainder of the extended term. The process involves serving a Section 42 notice on the freeholder and, if the premium cannot be agreed, applying to the First-tier Tribunal for a determination.
Deed of Variation
A deed of variation is a negotiated agreement between the leaseholder and the freeholder to change the terms of the lease. You can use a deed of variation to reduce the ground rent, cap it at a fixed amount, or convert it to a peppercorn ground rent. Unlike a statutory lease extension, a deed of variation is entirely voluntary on both sides, so the freeholder is under no obligation to agree. The cost will depend on what the freeholder is willing to accept as compensation for the loss of future ground rent income.
Collective Enfranchisement
Collective enfranchisement allows a group of qualifying leaseholders to purchase the freehold of their building. Once the leaseholders own the freehold, they can grant themselves new leases at a peppercorn ground rent and eliminate ground rent charges entirely. This route requires the participation of at least half the qualifying leaseholders in the building and involves a purchase price for the freehold, but it gives leaseholders full control over their building and removes the freeholder's right to collect ground rent permanently.
- Statutory lease extension reduces ground rent to a peppercorn as a matter of law
- Deed of variation can cap or eliminate ground rent by agreement with the freeholder
- Collective enfranchisement gives leaseholders ownership of the freehold and full control over ground rent
- All three routes are available to existing leaseholders without waiting for future legislation
- Professional advice is essential to determine which option is most cost-effective for your situation
- The earlier you act, the lower the cost is likely to be, particularly if your ground rent is escalating
Frequently Asked Questions About Ground Rent Abolition
When will ground rent be abolished?
Ground rent has already been abolished for new residential leases granted on or after 30 June 2022 under the Leasehold Reform (Ground Rent) Act 2022. For these leases, ground rent is restricted to one peppercorn per year, which has no financial value. For existing leases granted before that date, ground rent has not yet been abolished. The government has indicated that future legislation may cap or eliminate ground rent on existing leases, but no Act of Parliament has been passed to do so. Leaseholders on older leases must continue to pay their ground rent as demanded until the law changes.
Is ground rent still legal?
Yes, ground rent is still legal on leases granted before 30 June 2022. The Leasehold Reform (Ground Rent) Act 2022 only applies to new residential long leases granted on or after that date. If your lease was granted before the Act came into force, the ground rent clause in your lease remains fully enforceable, and your freeholder or managing agent is entitled to collect it. Ground rent on new leases granted after 30 June 2022 is restricted to a peppercorn, but this does not make ground rent on older leases illegal. Leaseholders should check their lease terms carefully and seek advice if they are unsure about their obligations.
What is a reasonable ground rent?
There is no legal definition of a reasonable ground rent for existing leases. Historically, ground rents on long residential leases ranged from as little as 50 pounds to several hundred pounds per year. A ground rent is generally considered reasonable if it is modest, fixed or subject to limited increases, and does not approach the 250 pound threshold that could trigger assured shorthold tenancy classification. For new leases granted after 30 June 2022, the only lawful ground rent is a peppercorn. If your existing ground rent feels excessive, particularly if it contains a doubling clause or RPI-linked escalation, you may be able to reduce it through a lease extension, deed of variation, or collective enfranchisement.
Can I challenge my ground rent?
You cannot challenge the amount of ground rent specified in your lease simply because you consider it too high, as it is a contractual obligation you agreed to when the lease was granted or assigned to you. However, you can take steps to reduce or eliminate your ground rent. The most common route is a statutory lease extension, which under the current law results in a peppercorn ground rent for the extended term. Alternatively, you may be able to negotiate a deed of variation with your freeholder to reduce or cap the ground rent. If your building qualifies, collective enfranchisement allows leaseholders to purchase the freehold and set their own ground rent terms. You should also check that any ground rent demand you receive complies with the prescribed form under Section 166 of the Commonhold and Leasehold Reform Act 2002, as ground rent is not payable without a valid demand.
Is it normal for ground rent to double every 25 years?
Doubling clauses were relatively common in leases granted during the early 2000s and in some older leases. While they were legal at the time, they are now widely regarded as unfair and onerous. A ground rent that doubles every 25 years may appear manageable at first, but over the full term of a long lease the amounts can become extremely high. For example, a ground rent starting at 250 pounds that doubles every 25 years would reach 1,000 pounds after 50 years and 2,000 pounds after 75 years. These clauses can also make properties difficult to sell or mortgage, as lenders may refuse to lend on leases with escalating ground rents. The 2022 Act prevents doubling clauses in new leases, but existing leases with these provisions remain enforceable until further reform is introduced.
What is the 250 rule?
The 250 rule refers to the threshold at which a long residential lease in England may be classified as an assured shorthold tenancy under the Housing Act 1988. If the annual ground rent on a lease exceeds 250 pounds per year (or 1,000 pounds per year in London), the lease can fall within the definition of an assured shorthold tenancy, which gives the freeholder the right to seek possession of the property if the ground rent is unpaid. This is a serious concern for leaseholders with escalating ground rent clauses, particularly doubling clauses, because a ground rent that starts below 250 pounds can cross this threshold over time. Leaseholders whose ground rent is approaching or has exceeded 250 pounds should seek specialist advice about reducing their ground rent through a lease extension or deed of variation.
Need Help With Your Ground Rent?
Whether you need advice on reducing your ground rent charges, professional ground rent management for your building, or help understanding your options for a lease extension or collective enfranchisement, Block is here to help. Our experienced team advises leaseholders and freeholders across England and Wales on all aspects of ground rent abolition and leaseholder rights.