The Leasehold Reform (Ground Rent) Act 2022 (LRGA 2022) abolished financial ground rent for new regulated residential leases in England and Wales from 30 June 2022. Any freeholder granting a new regulated long lease must set the ground rent at a peppercorn (zero). Demanding financial ground rent on a new regulated lease is a criminal offence with fines up to �30,000.
What is a regulated lease?
A regulated lease is a long residential lease (over 21 years) of a dwelling granted on or after 30 June 2022. Business leases, statutory lease extensions granted before the Act, community housing leases, and certain other leases are excluded. Retirement housing providers had until 1 April 2023 to comply.
Existing leases � doubling and escalating ground rents
Leases granted before June 2022 with doubling or RPI-linked ground rent clauses remain legally enforceable but are commercially problematic. Many mortgage lenders refuse to lend on properties with doubling ground rents, restricting the buyer pool and refinancing options. Options include negotiating a deed of variation to reduce or commute the ground rent, or extending the lease statutorily (which replaces the existing ground rent with a peppercorn).
Ground rent demand requirements
On pre-2022 leases, freeholders must serve a valid Section 166 notice (Form 166) before ground rent falls due. The demand must state the amount, period, payment date, and freeholder details. Defective demands are unenforceable until corrected. Forfeiture for ground rent is restricted by Section 167 CLRA 2002 � the outstanding sum must exceed �350 or be unpaid for over 3 years.
Implications for buy-to-let investors
Landlords buying new leasehold flats post-June 2022 benefit from zero ground rent. When buying older stock, always check the ground rent clause and escalation mechanism. A property with a doubling ground rent may be difficult to remortgage or sell. The Leasehold Reform and Freehold Act 2024 makes further changes including new lease extension terms of 990 years and enhanced enfranchisement rights.