The 2022 Act banned ground rents on new leases. The 2024 Act goes further. Learn what these reforms mean for your existing ground rent obligations and your extension premium.
The Leasehold Reform (Ground Rent) Act 2022 and the Leasehold and Freehold Reform Act 2024 have fundamentally transformed ground rent rules in England and Wales. However, neither Act retrospectively eliminates ground rent on existing leases — a critical point many leaseholders misunderstand.
Extending your lease under the statutory Section 42 route automatically converts your ground rent to peppercorn for the extended term. Eliminating an escalating future ground rent can be worth thousands of pounds — and is a major incentive to extend now.
Leases with doubling or RPI-linked ground rents create mortgage lender problems. Many lenders refuse mortgages on properties where ground rent exceeds 0.1% of property value or is structured to double. If you are on an escalating ground rent, extending your lease is urgent for mortgageability reasons as well as premium reasons.
The higher your current annual ground rent, the larger the ground rent capitalisation element of your premium. A property with £1,000/year ground rent will have a significantly higher premium than an identical property with £100/year ground rent, all else equal. Extending while your ground rent is still relatively low reduces your premium.
The 2022 Act banned ground rent on most new residential long leases in England and Wales from 30 June 2022. All new leases must now set ground rent at a peppercorn — effectively zero. It does not apply to existing leases. Breaches (charging ground rent above peppercorn on new leases) carry civil penalties of up to £5,000.
No. The 2022 Act only applies to leases granted on or after 30 June 2022. If your lease predates this, your ground rent remains as stated in your lease — including any escalation clauses. However, certain doubling ground rent clauses may make your lease unmortgageable and some lenders have specific requirements around ground rent multiples.
Ground rent is capitalised as part of the lease extension premium calculation. The freeholder loses the right to collect ground rent when a lease is extended (it falls to peppercorn), so you compensate them for this loss. Higher ground rent = higher premium, all else being equal. Our free calculator factors in your current ground rent when estimating your premium.
An escalating ground rent is one that increases at set intervals — typically doubling every 10 or 25 years, or rising with RPI. A ground rent that starts at £250/year and doubles every 10 years reaches £8,000/year within 50 years. Many mortgage lenders refuse to lend against properties where ground rent can exceed 0.1% of property value or where it doubles within a term, making such properties difficult to sell.
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Calculate Now →This article is for general information only and does not constitute legal or financial advice. Always consult a specialist solicitor and RICS surveyor before taking any action.
We'll notify you when 2024 Act provisions come into force, new rates are published, and when landmark Tribunal decisions affect your premium.