Ground rent is an archaic and often misunderstood aspect of property ownership in England and Wales. We look at who has to pay it, why, and how recent reforms will likely result in this feudal land charge finally becoming a thing of the past.
Here, the team from online financial advice service Money Helpdesk has broken down everything you need to know about ground rent, including the latest developments around it.
What is ground rent?
In simple terms, it’s an annual fee paid by a homeowner with a leasehold property to the freeholder. The freeholder is the owner of the land on which the property is built. This is not like a service charge, which would typically cover maintenance and repair of communal areas, but simply a payment for the right to occupy the land that your home is built on.
Historically, ground rent payments were often very small, but in recent decades, many new build leasehold properties were sold with significantly higher ground rents, often with clauses allowing for them to double every 10 or 25 years. This led to considerable financial strain and anxiety for many leaseholders.
Who has to pay it?
Ground rent is exclusively paid by leaseholders in England and Wales. If you own a freehold property, or live elsewhere in the UK, you do not pay ground rent.
Before purchasing a property, it is crucial to understand whether it is freehold or leasehold. Your solicitor will provide you with all the necessary information, including details of any ground rent clauses.
What is a leaseholder?
A leaseholder is someone who owns a leasehold property. There are five million leasehold properties in England and Wales, with the vast majority being flats (around 70%). While in recent years some new-build houses on larger developments have been sold as leasehold, this practice has been heavily criticised.
When leaseholders buy their home, they purchase the property, and the right to live in it for a fixed period of time (the leaseholder term). The length of the lease remaining on a property when you buy it can impact your ability to get a mortgage or sell your home, as the shorter the lease length, the more your property value falls.
The Commonhold and Leasehold Reform Bill explained
The 2022 Leasehold Reform (Ground Rent) Act was a landmark legislation which effectively banned ground rents on most new residential long leases in England and Wales to a ‘peppercorn’ (zero financial value). This act set the groundwork for a softening of the leaseholder system, but did not go far enough to protect existing leaseholders, or completely prevent the sale of leasehold property.
In fact, in 2025 alone, around £600m in ground rent was collected from homeowners throughout England and Wales. However, this week the government has announced the Draft Commonhold and Leasehold Reform Bill, which, if ratified in parliament, is expected to come into force in late 2028.
This bill goes way further to protect existing leaseholders and essentially replace dated leasehold practices with modern commonhold rules.
Key changes
- Ground rent cap: Ground rent will be capped at £250/year for all existing leases, dropping to £0 after 40 years
- Leasehold ban: New flats must now be commonhold
- Forfeiture abolished: Freeholders can no longer take your home over a £350 ground rent debt
- Conversion of terms: You can now convert a block of flats to commonhold if only 50% of neighbors agree
What is commonhold?
Commonhold is a type of home ownership where neighbours collectively own the ground their flats are built on as well as the building itself. This is fairly common practice across the globe, however, yet to become dominant in the UK.
Commonhold ownership removes the freeholder (or landlord) element of property ownership completely, replacing the leaseholder practice with a fairer, community-based ownership structure.
While the original Leasehold reform act introduced this back in 2022, the laws surrounding it made it very difficult to implement. However, this is expected to be the default way flats will be sold in England and Wales in the future, assuming the bill goes through parliament as is.
