What is Ground Rent?

If you own a leasehold property in England and Wales, you may need to pay ground rent to your freeholder. Here’s everything you need to know about what ground rent is and how it works.

What is ground rent?

Ground rent is a payment that leaseholders make to the freeholder (landlord) of their property. It’s essentially rent for the land that your property sits on.

When you own a leasehold property, you own the building or flat but not the land underneath it. The freeholder owns the land, so you pay them ground rent for the right to use it.

How much is ground rent?

Ground rent varies significantly from property to property. There’s no set formula for calculating it.

Typical amounts include:

£10 per year for ex-local authority flats
£50-£100 per year for older residential properties
£200-£500 per year for some modern developments
£1+ per year for “peppercorn rent” properties

The amount is specified in your lease agreement, so you’ll know exactly how much you need to pay when you buy the property.

When do you pay ground rent?

Ground rent is typically paid annually, but it can also be:

Half-yearly (every 6 months)
Quarterly (every 3 months)

Your lease will specify exactly when payments are due.

Fixed vs escalating ground rent

Ground rent can be structured in two ways:

Fixed ground rent

Stays the same throughout your lease
Provides certainty about costs
More common in older leases

Escalating ground rent

Increases over time according to set rules
Your lease will specify when and by how much it increases
Example: £50/year for first 33 years, £100/year for next 33 years, £150/year for final 33 years

Do you have to pay ground rent?

You only have to pay ground rent if the freeholder formally demands it in writing.

The demand must include:

Your name as the lessee
The period the demand covers
The amount you need to pay
The freeholder’s name and address
The due date for payment

If any of this information is missing, the demand may not be valid.

What happens if you don’t pay?

If you don’t pay ground rent after a valid demand, the freeholder can:

Take legal action

Sue you in court to recover the debt
Add legal costs to what you owe

Start forfeiture proceedings

Try to regain possession of your property
This can only happen if you owe £350+ and have been in arrears for 3+ years

Peppercorn rent explained

A “peppercorn rent” is a nominal or very low ground rent, often just £1 per year or even nothing.

Historically, freeholders would ask for an actual peppercorn as a symbolic payment. Today, it means any very small amount that satisfies the legal requirement for rent without creating a financial burden.

Recent changes to ground rent law

The Leasehold Reform (Ground Rent) Act 2022 made significant changes:

New leases from 30 June 2022: Most new residential leases can only charge peppercorn rent (effectively £0)
Existing leases: Still subject to their original terms
Lease extensions: Often result in peppercorn rent being applied

This law was introduced to address problems with escalating ground rents that were making some properties difficult to sell or mortgage.

Ground rent vs service charges

It’s important not to confuse ground rent with service charges:

Ground rent:

Payment for using the land
Doesn’t cover any services or maintenance
Usually a fixed annual amount

Service charges:

Payment for building maintenance and services
Covers things like cleaning, repairs, insurance
Amount varies based on actual costs

How ground rent affects property value

High ground rent can impact your property in several ways:

Mortgage difficulties

Some lenders won’t lend on properties with ground rent over £250 (£1,000 in London)
Escalating ground rents can make mortgages harder to obtain

Selling problems

High or escalating ground rent can put off buyers
May reduce your property’s market value

Peppercorn rent benefits

Properties with peppercorn rent are more attractive to buyers
No ongoing financial burden from ground rent

How to reduce or eliminate ground rent

There are several options if you want to reduce your ground rent:

Lease extension

Extend your lease by 90 years
Ground rent becomes peppercorn rent
Available after owning the property for 2+ years
Involves paying a premium to the freeholder

Buy the freehold

Purchase the freehold of your building
Eliminates ground rent entirely
Usually requires cooperation from other leaseholders
More complex and expensive process

Collective enfranchisement

All leaseholders in a building buy the freehold together
Gives control over the building and eliminates ground rent
Requires at least 50% of leaseholders to participate

Ground rent and assured tenancies

Be aware that if your ground rent exceeds certain thresholds, your lease might be classified as an assured tenancy:

£250 per year outside London
£1,000 per year in Greater London

This gives the freeholder stronger powers to repossess your property if you fall behind on payments.

What to do if you have high ground rent

If you’re struggling with high or escalating ground rent:

Check your lease terms – Understand exactly what you’re committed to
Get professional advice – Consult a property lawyer or surveyor
Consider your options – Lease extension, freehold purchase, or selling
Join with neighbours – Work together if you’re in a block of flats

Key takeaways

Ground rent is payment for using the land your property sits on
It only applies to leasehold properties
Amounts vary widely, from £10 to £500+ per year
New leases since June 2022 can only charge peppercorn rent
High ground rent can affect mortgages and property values
You can reduce ground rent through lease extension or buying the freehold
Always get professional advice for complex ground rent issues

Getting help

If you need advice about ground rent, consider speaking to:

A property solicitor specialising in leasehold law
A chartered surveyor with leasehold experience
Your local Citizens Advice Bureau for initial guidance

Understanding your ground rent obligations is crucial for managing the costs of leasehold ownership and making informed decisions about your property.