Ground rent is a fee that a leaseholder pays to the freeholder for the right to occupy the land their property sits on. Understanding what ground rent is and how much it costs matters most if you own, or are buying, a leasehold flat, because unlike a service charge the freeholder does not have to provide anything in return for it. The amount is set out in your lease, along with the basis on which it can rise over time.
How much you pay varies enormously. Some leaseholders pay nothing, many pay a modest annual sum, and a smaller number are stuck with high or escalating rents that have caused real problems. The rules are also changing, so this guide covers both what ground rent is today and where the reforms are heading.
What ground rent actually pays for
In short, nothing tangible. Ground rent is a payment for the land beneath your home, not for a service. That is what distinguishes it from a service charge, which covers maintenance, insurance and the upkeep of communal areas.
Two features of ground rent are worth grasping up front:
- It is a term of the lease, so the freeholder can require it purely because the lease says so.
- The lease also sets out how it increases, which is where the trouble has historically arisen.
Most leases specify either a fixed rent or one that rises at set intervals. Problems occur when those rises are steep, for example rents that double every ten to fifteen years, which can quickly become unaffordable and make a property difficult to sell or mortgage.
How much is ground rent?
There is no single figure, but official data gives a useful picture. According to the English Housing Survey for 2023 to 2024, around 23% of leaseholders paid no ground rent at all. Among those who did pay, the median was about £120 a year, while the mean was around £304 a year.
The gap between those two numbers tells its own story. The median sits well below the mean because a relatively small number of leaseholders pay much higher rents, dragging the average up. In practice:
- Many leaseholders pay a low fixed amount, often in the tens or low hundreds of pounds.
- A minority pay several hundred pounds or more, sometimes with escalating clauses.
- New leases granted since mid-2022 are generally set at a peppercorn, meaning effectively zero.
If you are buying, the key is to read the lease and check both the current ground rent and how it is set to rise, rather than assuming it stays flat.
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New leases: the peppercorn rule
The rules changed significantly with the Leasehold Reform (Ground Rent) Act 2022. From 30 June 2022, most new long residential leases can only charge a peppercorn ground rent, which is a legal way of saying effectively nothing. For retirement properties, the same rule applied from 1 April 2023.
This was a major shift, but it is not retrospective. It applies to new leases granted after those dates, not to the millions of existing leases signed beforehand. If your lease predates the Act, you remain bound by whatever ground rent it specifies.
Here is how the position compares:
| Lease type | Ground rent position |
|---|---|
| New long lease (from 30 June 2022) | Capped at a peppercorn (effectively £0) |
| Retirement property lease (from 1 April 2023) | Capped at a peppercorn |
| Existing lease (before June 2022) | Whatever the lease states, still payable |
| Statutory lease extension | Reduced to a peppercorn |
For more info: the Leasehold Advisory Service explains ground rent and the planned changes for leaseholders in England and Wales.
The reforms coming for existing leases
The big outstanding question is what happens to the millions of older leases still charging ground rent. Reform has been moving in stages, and the direction of travel is clearly towards cutting these costs.
The main milestones are:
- 2022. The Leasehold Reform (Ground Rent) Act ends ground rent on most new leases.
- 2024. The Leasehold and Freehold Reform Act introduces measures such as longer statutory lease extensions of 990 years and the abolition of marriage value, though several provisions are being brought in gradually.
- January 2026. The government publishes the draft Commonhold and Leasehold Reform Bill, proposing to cap ground rents on existing leases at £250 a year, reducing to a peppercorn after 40 years.
- Around 2028. The proposed cap is expected to take effect, subject to Parliament and any legal challenge.
According to the House of Commons Library, the government estimates that leaseholders in around 3.8 million properties across England and Wales could benefit from the proposed cap. Until it becomes law, however, existing leaseholders remain bound by their current terms.
What high ground rent means for buyers and sellers
Ground rent is not just an annual cost. It affects how easily a leasehold property can be sold and mortgaged.
Lenders tend to be wary of leases where the ground rent is high relative to the property value, or where it escalates steeply. That caution can shrink the pool of buyers who can get a mortgage, which in turn affects the price and how quickly a flat sells.
By contrast, a peppercorn or low fixed ground rent is far more attractive to buyers and lenders alike. If you are considering a leasehold purchase, the ground rent clause deserves as much attention as the price and the length of the lease.
What you can do about a high ground rent
If you already own a leasehold property with a high or rising ground rent, you are not necessarily stuck with it. The main routes to reducing it are:
- A statutory lease extension, which reduces the ground rent to a peppercorn as part of the process.
- A deed of variation, negotiated with the freeholder, to change the rent terms.
- Waiting for reform, if you do not need to act urgently, since the proposed cap may reduce the cost without you paying a premium.
Each route has cost and timing implications, and lease law is notoriously complex, so it is worth taking specialist advice before deciding which suits your situation.
Ground rent versus service charge
It is easy to confuse ground rent with a service charge, but they are different things and it helps to be clear on which is which.
Ground rent is a payment for the land, and the freeholder does not have to do anything in return for it. A service charge, by contrast, pays for the actual running of the building, such as maintenance of communal areas, buildings insurance, cleaning, lifts and, in some blocks, a reserve fund for major works.
The practical differences matter when you are budgeting for a leasehold flat:
- Ground rent is usually a fixed or set-to-rise amount, while service charges vary year to year with the building’s actual costs.
- Ground rent buys you nothing tangible, whereas a service charge should be spent on the property.
- Reforms are cutting ground rent towards zero, but service charges will continue because the building still needs to be maintained.
When you view a leasehold property, ask for both figures separately, along with recent service charge accounts, so you can see the full annual cost rather than just the headline price.
The bottom line
Ground rent is a payment leaseholders make to the freeholder for the land under their home, with no service provided in return, and how much it costs is set entirely by the lease. Official data suggests a median of around £120 a year among those who pay, but the range runs from zero to sums that can make a property hard to sell. New leases are now largely peppercorn, and a proposed cap of £250 for existing leases is expected around 2028. If you are buying leasehold, read the ground rent clause carefully and factor it into your decision.
This article is for general information and is not legal or financial advice. For guidance on your own lease, consult a qualified property solicitor or a recognised leasehold advice service.
Frequently asked questions
What is ground rent in simple terms?
Ground rent is a fee a leaseholder pays the freeholder for the right to occupy the land their property stands on. Unlike a service charge, the freeholder does not have to provide anything in return.
How much ground rent should I expect to pay?
Among leaseholders who pay it, the English Housing Survey put the median at around £120 a year, though the mean was higher at about £304. Some pay nothing, while others face much higher or escalating rents set by older leases.
Do new leases still charge ground rent?
Generally no. Since 30 June 2022, most new long residential leases can only charge a peppercorn ground rent, which is effectively zero.
Is ground rent being abolished?
It has already ended for most new leases, and the government has proposed capping ground rent on existing leases at £250 a year, falling to a peppercorn after 40 years. That cap is expected to take effect around 2028, subject to Parliament.
For more info: the House of Commons Library briefing on the ground rents cap covers the proposals and who would benefit.
