Landlord Ground Rent Reform UK 2026 — Leasehold Reform (Ground Rent) Act 2022

Ground rent has been a major source of controversy in the leasehold sector. Developers and freeholders sold new-build properties on leases with escalating ground rents — some doubling every 10 years — making the properties unmortgageable and effectively unsaleable. The Leasehold Reform (Ground Rent) Act 2022 was Parliament's first legislative response: a ban on ground rent for new regulated leases, with civil penalties for non-compliance.

For landlords who grant leases — including buy-to-let investors selling long leases on flats, developers granting new residential leases, and freeholders extending existing leases — the rules have fundamentally changed. Understanding which leases are regulated, what counts as a prohibited rent, and what the penalties are is essential to avoid civil enforcement action.

What leases are caught by the Act — 'regulated leases'

The Act applies to 'regulated leases', broadly defined as new long residential leases (21 years or more) granted on or after the relevant commencement date. Key exclusions and commencement dates:

Most new residential leases: The Act applies from 27 June 2022 (commencement date for most leases). Any new regulated lease granted on or after this date can only reserve a peppercorn ground rent
Retirement housing: A separate, later commencement date applied to retirement home leases — from 1 April 2023. Retirement homes previously had a longer window to comply
What counts as a 'regulated lease': A long residential lease (term exceeding 21 years) of a dwelling. This covers flats, houses let on long leases, and shared ownership leases
Not regulated: Business leases, agricultural tenancies, assured tenancies (typical monthly rentals), community housing leases, certain statutory lease extensions, and leases granted pursuant to a contract entered into before the commencement date (transitional period protection)
Existing leases are NOT retrospectively reduced: Ground rent on leases granted before the commencement date remains legally enforceable under the terms of the original lease. The Act does not reduce, cap, or eliminate existing ground rent obligations

What is a 'peppercorn' and what rents are prohibited

On a regulated lease, the only permitted ground rent is a 'peppercorn rent':

A peppercorn rent in English law means a nominal rent of zero monetary value — effectively no ground rent is payable by the leaseholder
Prohibited rent: Any ground rent that is more than zero is a 'prohibited rent' under the Act. This includes nominal amounts like £1/year, £10/year, or any index-linked or review clause that allows future increases
Rent review provisions: Any clause in a new regulated lease allowing the ground rent to be reviewed or increased is also prohibited — even if the reviewed rent could remain at peppercorn, a review mechanism itself is not permitted
Disguised rent: Attempting to achieve the same economic effect as ground rent through other charges (service charges, administration fees, or other periodic payments) which are not genuine charges for services provided is likely to be caught by enforcement action even if not explicitly prohibited
The prohibition applies from the date the lease is granted. A landlord cannot charge ground rent in the first year and then purport to reduce it to peppercorn — the lease must be drafted with a peppercorn rent from day one

Civil penalties — enforcement by Trading Standards

Charging a prohibited ground rent is a civil offence. Enforcement is by local authority Trading Standards departments:

The penalty for charging a prohibited rent is between £500 and £5,000 for each breach. A breach occurs each time a prohibited rent is demanded or collected
Trading Standards can issue a fixed penalty notice. The landlord/freeholder has the right to challenge the notice
Multiple demands or collections of prohibited rent result in multiple breaches — each demand is a separate breach, meaning repeated charging can result in substantial cumulative penalties
Trading Standards may also require the landlord to repay any prohibited ground rent collected
There is no direct right of action for leaseholders against their landlord for charging a prohibited ground rent under the Act — enforcement is via Trading Standards, not private litigation (though leaseholders can report breaches to prompt enforcement)
The risk of reputational damage and the cost of enforcement proceedings make compliance a strong priority for any landlord or developer granting new long leases

Implications for landlords extending or varying existing leases

Lease extensions and variations under the Act are more complex than granting a new lease:

Statutory lease extensions (Leasehold Reform Act 1967 and Leasehold Reform Housing and Urban Development Act 1993): A statutory extension granted under either Act must be at a peppercorn ground rent for the entire extended term. This is a significant benefit to leaseholders exercising statutory extension rights
Voluntary (informal) lease extensions: If a voluntary extension is agreed and a new lease is granted, the new lease is a 'regulated lease' if granted on or after the commencement date and is for a term exceeding 21 years — it must therefore carry only a peppercorn rent
Variations to existing leases: If a variation is agreed that essentially creates a new lease (or that is structured to avoid the Act), it may be treated as a new regulated lease. Legal advice should be taken before varying a lease in a way that could be caught
Surrender and re-grant: Where works agreed between landlord and leaseholder result in a surrender and re-grant of the lease (e.g. additions to the demise), the new lease granted will be a regulated lease
Freeholders and managing agents who routinely grant lease extensions should ensure their standard form leases are updated to comply with the peppercorn requirement

Leasehold and Freehold Reform Act 2024 — further changes

The Leasehold and Freehold Reform Act 2024 enacted further reforms beyond ground rent. Key provisions relevant to landlords:

Service charge transparency: New requirements for landlords and managing agents to provide detailed, standardised service charge accounts
Buildings insurance commissions: Restrictions on landlords and managing agents receiving and retaining insurance commission payments without disclosure
Right to Manage: The Right to Manage is extended to mixed-use buildings and the costs of an RTM application are changed
Enfranchisement reform: Changes to how the enfranchisement premium is calculated — broadly, the capitalisation rates are reset to reduce the premium leaseholders pay to buy their freehold or extend their lease
Not all provisions of the 2024 Act were in force as of June 2026 — implementation is phased. Landlords with significant leasehold portfolios should monitor commencement orders from MHCLG (Ministry of Housing, Communities and Local Government)
The government has also announced its intention to abolish the leasehold system for houses entirely and to introduce a new 'commonhold' tenure — further legislation is expected in the 2024–29 Parliament

Frequently asked questions

I granted a new lease in 2021 with a ground rent of £250/year. Is this now prohibited?+

No. The Leasehold Reform (Ground Rent) Act 2022 does not apply retrospectively to leases granted before the commencement date (27 June 2022 for most leases). Your lease, having been granted in 2021, was valid under the law at the time. The ground rent of £250/year remains enforceable under the terms of your lease. However, if you extend the lease or grant a new lease on or after 27 June 2022, the new or extended lease must be at a peppercorn rent.

Can I still charge an admin fee when the leaseholder requests a copy of the lease or a consent letter?+

Reasonable administration charges for genuine services (providing a licence to sublet, a consent to alterations, or a copy of the lease) are not prohibited ground rent and are generally still permissible under the terms of the lease. What is prohibited is any periodic payment that functions as ground rent — i.e. a recurring charge for simply holding the lease that is not linked to any specific service provided. If your leases contain both a ground rent and administration charge provisions, take legal advice to confirm which elements are caught.

Does the ground rent ban apply in Scotland, Wales, and Northern Ireland?+

The Leasehold Reform (Ground Rent) Act 2022 applies primarily in England (and Wales, where leasehold law is similar). Scotland has a different system — since the Abolition of Feudal Tenure etc. (Scotland) Act 2000, most feudal burdens have been abolished and the Scottish system does not operate in the same way as English leasehold. Northern Ireland has its own separate leasehold reform proposals. Landlords with properties in Scotland or Northern Ireland should take advice from solicitors qualified in those jurisdictions.

I am considering selling the freehold of my block of flats. Will the Act affect the sale?+

The Act affects ground rent income — if any of the flats are on regulated leases granted after 27 June 2022, the ground rent on those flats is peppercorn and carries no capital value. For leases granted before that date with genuine ground rents, those income streams remain enforceable and have a capital value. Potential buyers of freeholds will price the freehold based on the ground rent income (for pre-2022 leases) and future enfranchisement premiums. The Leasehold and Freehold Reform Act 2024 changes to enfranchisement premium calculation will also affect freehold valuations. Take specialist leasehold valuation advice before marketing a freehold.