Ground Rent
An annual fee paid by leaseholders to the freeholder for the right to occupy the land, typically a fixed amount or increasing on a schedule.
Ground rent is a charge paid by leaseholders to the freeholder (landowner). It is separate from the service charge and is essentially the cost of "renting" the land your property sits on.
Leasehold Reform
The Leasehold Reform (Ground Rent) Act 2022 capped ground rent on new leases granted after 30 June 2022 at a "peppercorn" (effectively zero). However, existing leases are unaffected — meaning many properties still carry ground rent obligations.
Common Ground Rent Structures
- Fixed ground rent: A set amount (e.g., £250/year) for the lease term
- Escalating ground rent: Increases at fixed intervals (e.g., doubles every 25 years)
- RPI-linked ground rent: Increases with inflation — can grow substantially over a long lease
Risk: Escalating Ground Rent
Doubling ground rent clauses have caused serious problems for some leaseholders. A £300 ground rent doubling every 10 years becomes £600, then £1,200, then £2,400 — making the property increasingly expensive to hold and potentially difficult to mortgage or sell.
Impact on BTL
Ground rent is a relatively small cost for most properties (£100–£500/year), but it directly reduces net yield and must be factored into your calculations. Always check the lease terms to understand whether and how ground rent escalates.