Ground Rent

Ground rent is a regular charge paid by a leaseholder to the freeholder/landlord for the right to occupy the land on which a leasehold property is built. It is usually a flat. The lease sets the amount, when it is due, and how future increases work.

For a freeholder-landlord, ground rent is an income stream linked to owning the freehold. For many small landlords, however, it is a cost, because they themselves are leaseholders of a flat which they then let out on an assured tenancy. In that case, ground rent is payable to the superior landlord and cannot normally be passed on as a separate “fee” to the tenant, it should be reflected in the overall rent and service charge structure.

The Leasehold Reform (Ground Rent) Act 2022 has reduced ground rents on most new long residential leases to a nominal “peppercorn” (effectively zero), and there are ongoing proposals to cap or further restrict onerous ground rents on existing leases.

The Renters’ Rights Act mainly reforms private renting rather than leasehold law, but its focus on limiting extra charges and improving transparency means landlords should be cautious about trying to treat ground rent as an additional payment from residential tenants rather than a cost of doing business.