Ground Rent Rules UK: What Is Law, What Is Draft, and What Your Lease Actually Says

Ask what the ground rent rules are in the UK and you will get three different answers, all of them correct for somebody. A friend who bought a new-build flat in 2023 pays nothing. Your own 2007 lease started at £295 a year and doubles it every decade. And the news keeps reporting a £250 cap that, when you check your demand, has made no difference at all. None of these people is wrong about their own position. The confusion comes from treating three separate legal states as one, and almost all of the bad information online does exactly that.

This page keeps the states apart, because the separation is the answer. One is law for new leases, one is the unchanged position for existing leases, and one is a draft Bill that binds nobody yet. Get your lease into the right column and the rest follows: what you owe, and whether the clause is enforceable.

The three states of ground rent law in 2026

State	What it covers	Position in August 2026
1. Law for new leases	Qualifying residential long leases granted on or after 30 June 2022 (1 April 2023 for retirement homes)	Peppercorn only. The Leasehold Reform (Ground Rent) Act 2022 prohibits any monetary ground rent.
2. Law for existing leases	Leases granted before those dates	Untouched. Contractual ground rent, including doubling and RPI clauses, remains payable as drafted.
3. Not law	The proposed £250 cap for existing leaseholders	Draft only. It sits in the forthcoming Commonhold and Leasehold Reform Bill and has no legal effect.

All three states are England and Wales. Scotland has no equivalent residential leasehold regime and Northern Ireland legislates separately, so none of what follows applies north of the border or across the Irish Sea.

The commonest mistake is assuming the 2022 Act helped existing leaseholders; it did not, and was never designed to. The other is attributing the £250 cap to the Leasehold and Freehold Reform Act 2024; the cap is not in that Act either, and much of the 2024 Act itself is not yet in force. For the full commencement picture on the 2024 reforms, including marriage value and the 990-year term, see our page on what is actually in force under the Leasehold and Freehold Reform Act 2024. This page carries only the ground rent rows of that ledger.

New leases: the peppercorn regime

The Leasehold Reform (Ground Rent) Act 2022 is short, and its architecture is worth knowing because it decides whether a given lease is caught at all.

Section 1 defines a regulated lease: broadly, a residential long lease (over 21 years) granted for a premium on or after the Act's commencement. Commencement was set by SI 2022/694: 30 June 2022 for leases generally and 1 April 2023 for leases of retirement homes. Those dates are the boundary between state 1 and state 2, so if a seller or agent tells you a 2021 lease is "peppercorn under the new rules", the dates are the check.

For a regulated lease, section 3 makes it unlawful for the landlord to require payment of a prohibited rent, and section 4 fixes the permitted rent at one peppercorn per year. A peppercorn rent is a legal formality with no monetary value; nobody collects it. The practical effect is that a qualifying lease granted today cannot carry any ground rent at all, and a landlord cannot dress one up as something else, because the Act looks at the substance of the reservation.

Section 2 lists the excepted leases that stay outside the regime. The ones you are most likely to meet:

• Statutory lease extensions. These are excepted because they already have their own, older peppercorn rule (more on this below).
• Business leases. The Act is a residential measure.
• Community housing leases and home finance plan leases. Narrow categories with their own frameworks.

Shared ownership and voluntary extensions get special treatment rather than exception. Under section 5, a shared ownership lease must reserve a peppercorn on the leaseholder's share, but the landlord can still charge rent on its own retained share, which is why shared owners still see a rent line on their statements. Under section 6, a voluntary extension of a pre-commencement lease becomes peppercorn only for the added years: the deal can preserve the old contractual rent for what remains of the original term, a detail worth checking before you sign a freeholder's informal extension offer.

If a landlord demands prohibited rent

The 2022 Act does not rely on the leaseholder to litigate. It has its own enforcement machinery, and the numbers in it are real.

• The term self-corrects. Under section 7, a term in a regulated lease reserving a prohibited rent is treated as reserving a peppercorn instead. The offending clause does not need to be struck out by a court; it simply reads as a peppercorn from the start.
• Trading standards enforce. Section 8 makes local weights and measures authorities (trading standards) the enforcement authorities, with a duty to act in their areas.
• Penalties of £500 to £30,000. Under section 9, an authority satisfied beyond reasonable doubt that a landlord has breached section 3 can impose a financial penalty of not less than £500 and not more than £30,000 per breach.
• Refunds can be ordered. Under section 10, the authority can order the landlord, or whoever received the money, to repay prohibited rent that has not already been refunded, with interest.

If you hold a post-June-2022 lease and have been invoiced for ground rent, the sequence is: check the lease is regulated (dates and premium), check none of the section 2 exceptions applies, then raise it in writing with the landlord citing section 7, and report to trading standards if the demand stands. A solicitor's letter usually ends it quickly, because the penalty exposure sits entirely on the landlord's side.

The £250 cap: a draft Bill, not law

The reform most existing leaseholders are waiting for, a cap on ground rents in leases that already exist, is in state 3. The proposal sits in the Commonhold and Leasehold Reform Bill, published in draft on 27 January 2026 for pre-legislative scrutiny and confirmed for the 2026-27 session in the May 2026 King's Speech, widely reported as a £250 cap tapering to a peppercorn over 40 years. Until the Bill is enacted and the relevant provisions commenced, it changes nothing: the figures, the taper, the exceptions and the start date all remain provisional, and Bills are routinely amended on the way through Parliament.

The boundaries of state 3 are worth stating plainly.

• It is not in the 2024 Act. The Leasehold and Freehold Reform Act 2024 contains no ground rent cap for existing leases. Coverage that says "the 2024 reforms capped ground rent" is wrong twice over.
• No commencement date is knowable. Even once enacted, provisions take effect only when commenced, and the 2024 Act is the cautionary tale: several of its headline reforms remain uncommenced more than two years after Royal Assent.
• It is contested territory. Freeholder investors challenged the Leasehold and Freehold Reform Act 2024's ground rent and valuation provisions in the Divisional Court and lost in October 2025 (R (ARC Time Freehold Income Authorised Fund) v SSHCLG [2025] EWHC 2751 (Admin)); the Court of Appeal has since given them permission to appeal. That case is about the 2024 Act, not the draft Bill, but it is another reason not to plan around a date nobody has.

The practical rule: make no decision (buying, selling, extending, pricing) on the assumption the cap will arrive on any particular date, or at all in its reported form. We track the Bill's pipeline status, and what it would mean for landlords and freehold investors, on our Commonhold and Leasehold Reform Bill page.

Existing leases: your contractual rent stands

State 2 is the uncomfortable one. If your lease was granted before 30 June 2022, the 2022 Act does not apply to it, the draft Bill does not help you yet, and the ground rent clause in your lease is an enforceable contractual term. That includes escalation clauses. A rent that doubles every 10 or 25 years, or that tracks RPI, is payable as drafted.

One boundary point worth a sentence: ground rent is not a service charge, so the statutory reasonableness machinery that lets leaseholders challenge service charges at the tribunal does not apply to it; that regime has its own rules, covered in our service charge disputes guide.

The compounding is what catches people. Take Elena, who bought a flat on a 2007-era lease reserving £295 a year, doubling every 10 years for the first 50 years of the term. The figures are illustrative, but the shape is what a doubling clause produces:

Review date	Annual ground rent
2007 (grant)	£295
2017	£590
2027	£1,180
2037	£2,360
2047	£4,720
2057	£9,440

Elena's problem in 2026 is not the £590 she currently pays. It is that any buyer's solicitor will read the schedule above, and any buyer's lender will apply its criteria to it. Many lenders decline or refer leases where the ground rent exceeds a small percentage of the property value (0.1% is a commonly applied threshold) or doubles more often than every 20 years or so. Criteria are lender-specific and change, so check the individual lender's handbook entry rather than a rule of thumb. A flat that mainstream lenders will not mortgage is a flat that sells slowly, to a narrower pool, at a discount, and the clause prices itself into the sale long before the rent itself becomes painful.

There are two exits, and only one of them is a right:

• The statutory lease extension. A qualifying flat leaseholder can compel a new lease under the Leasehold Reform, Housing and Urban Development Act 1993: the current form adds 90 years to the existing term and, under section 56, replaces the ground rent with a peppercorn for the whole of the new lease. The freeholder cannot refuse. You pay a premium, part of which compensates the freeholder for the ground rent stream being extinguished, so a heavy escalation clause pushes the premium up while leaving the claim itself just as available. What the premium looks like, and the costs around it, are covered in our lease extension cost guide. Since January 2025 there is no longer a two-year ownership requirement, so a buyer can start a claim immediately after completing.
• Negotiation. Some freeholders will vary a doubling clause by deed, typically converting it to an RPI link or a fixed rent, for a price. It needs the freeholder's agreement, independent valuation advice, and care that the variation does not create new problems for lenders.

Section 166: rent is not payable until it is properly demanded

State 2 is not without protection, and the protection that matters most in practice is procedural. Under section 166 of the Commonhold and Leasehold Reform Act 2002, in force since 31 May 2005, "a tenant under a long lease of a dwelling is not liable to make a payment of rent under the lease unless the landlord has given him a notice relating to the payment". Ground rent on an existing lease is contractually due, but it is not payable until it has been demanded in the right way.

The notice has work to do. It must be in the prescribed form under s.166(5); in England that is the form and accompanying notes in the Landlord and Tenant (Notice of Rent) (England) Regulations 2004 (SI 2004/3096), which also require the leaseholder's name, the period the rent covers, and the name and address for payment. Under s.166(2) it must specify the amount, the date you are liable to pay it and, where that differs, the date the rent would have fallen due under the lease. And under s.166(3) the payment date must be no less than 30 and no more than 60 days after the day the notice is given, and cannot be earlier than the lease's own due date.

Hold both halves of what that gives you. No liability arises until a compliant notice is given, so a freeholder who has demanded nothing for years has not been quietly accruing arrears on rent that was never validly demanded. But section 166 does not cancel the rent: a landlord who has been sloppy can serve compliant notices and collect, and where the notice sets a payment date later than the lease's own due date, s.166(4) applies the lease's non-payment and late-payment provisions by reference to that later date, so interest runs from the notice date. Section 166 is a condition of payability and not a route to challenge the level of the rent, which is fixed by the reservation clause and stands.

Forfeiture has a floor too. Section 167 of the same Act bars a landlord from exercising re-entry or forfeiture for unpaid rent, service charges or administration charges unless the unpaid amount exceeds a prescribed sum or has been outstanding for more than a prescribed period; in England the Rights of Re-entry and Forfeiture (Prescribed Sum and Period) (England) Regulations 2004 (SI 2004/3086) set those at £350 and three years. A demand letter waving forfeiture at one year's ground rent is not, on those figures, a forfeiture risk.

The assured tenancy trap, then and now

For years, one alarming warning circulated about ground rent over £250: that it could turn a long lease into an assured shorthold tenancy. The warning was technically right, and it is now out of date. Both halves matter, because the warning is still repeated everywhere and the correction is not.

The trap worked like this. Schedule 1 to the Housing Act 1988 lists tenancies that cannot be assured tenancies, and paragraph 3A excludes only tenancies where the rent is £250 or less a year (£1,000 or less in Greater London). A long lease at a ground rent above those figures could therefore technically qualify as an assured tenancy, provided the leaseholder occupied the flat as their only or principal home. The consequence was not academic: an assured tenant in ground rent arrears faced mandatory possession under Ground 8, a far blunter instrument than lease forfeiture with its notice requirements and relief. That risk, on leases where a doubling clause would push the rent through £250 sooner or later, was a real driver of lender caution and doubling-clause panic.

The trap is now closed for long leases. Paragraph 3D of Schedule 1, inserted by section 31 of the Renters' Rights Act 2025 and in force since 27 December 2025, excludes any fixed-term tenancy of more than 21 years from assured status regardless of the rent level. A residential long lease, which by definition exceeds 21 years, can no longer be an assured tenancy however high its ground rent climbs. (A companion paragraph 3E deals with a closed transitional group of 7-to-21-year fixed terms granted before the 2025 Act.) If you were told during a purchase or a remortgage that your ground rent level created an assured tenancy risk, that advice describes the pre-2026 world.

What has not changed: the rent itself remains payable, the escalation clause remains enforceable, and lender affordability criteria on escalating rents remain in force. Paragraph 3D removed the mandatory-possession cliff edge. The commercial problem is untouched.

Ground rent in two tax returns

Ground rent is a line item in two sets of accounts at once, and the treatment is not symmetrical.

The paying side: revenue-deductible if you let the flat. If you are a leaseholder landlord, the ground rent you pay is an expense of your rental business and is deductible against your rental income. HMRC's Property Income Manual confirms the treatment at PIM2205, which applies the rent-paid-out deduction to "any ground rent, rent-charge, ground annual or feu duty". If you occupy the flat yourself, there is no deduction; it is simply a cost of living there.

The fork that catches people: paying to remove it is capital. Here is the same flat, in two returns (illustrative figures). Idris lets a leasehold flat and pays £295 a year in ground rent; that £295 is deductible against his rent, saving him tax at his marginal rate each year. In 2026 he pays an £8,000 premium to extend the lease, which converts his rent to a peppercorn; what drives a premium of that size is set out in our lease extension cost guide. The £8,000 is not deductible against rental income in any year: it is capital expenditure on the lease itself, which instead forms part of his allowable cost when he eventually sells the flat and computes his capital gain. He has swapped a recurring deductible expense for a one-off capital cost, which is usually still the right commercial decision (the premium buys term length and saleability, not just the rent saving), but the two sit in entirely different tax boxes and it is a genuine error to put the premium on the rental pages of a return.

The receiving side: taxable property income. Meanwhile the freeholder who collected Idris's £295 declares it as property income, whether they are an individual within income tax or a company within corporation tax. HMRC's manuals (PIM1051 and PIM1056) list ground rents alongside rent-charges and feu duties as receipts of a property business. A capital sum received to extinguish the rent, such as an extension premium, is on capital account for the freeholder too, taxed as a disposal rather than as income.

This is also why the draft Bill matters to a different audience. A freehold investment is substantially a capitalised ground rent stream plus a deferred reversion. The 2022 Act already removed new leases from that market; a statutory cap on existing rents would cut directly into the income leg of every affected freehold, which is precisely what the freeholders' litigation is about. If you hold freehold ground rents as an investment, the appraisal question is not whether the cap is law today (it is not) but how much of your valuation survives if it becomes law, and that is a conversation to have with your accountant and valuer while the purchase or refinance is still being priced. Landlords modelling ground rent as a running cost against their portfolio's numbers can use our portfolio profitability calculator to see what an escalating rent line does to net yield over time.

What buyers should check before offering

Ground rent due diligence is cheap at the offer stage and expensive after exchange. Before committing to a leasehold flat, get answers to these, and read them against the three states at the top of this page:

1. Which state is the lease in? Granted on or after 30 June 2022 for a premium and not excepted: peppercorn, and any demand is unlawful. Granted earlier: the lease's own terms govern in full.
2. The current figure and the clause. Not just what is payable now, but the reservation clause itself: fixed, doubling, or index-linked, over what intervals, and until when. A £295 rent doubling every 10 years and a £295 rent fixed for the term are different assets.
3. The next review date. A doubling clause with a review next year is a different negotiation from one with 9 years to run.
4. Arrears and demand history. The seller's replies to the LPE1 form should state the current rent, the payment position and any disputes. The form is a starting point; the lease governs, so have your conveyancer confirm the clause rather than relying on the summary.
5. Your lender's criteria. Check the ground rent schedule against your lender's requirements before you spend money on the purchase, and remember the buyer after you will run the same check. A lease that fails common lender tests today is your resale problem tomorrow.
6. The exit price. If the clause is bad, price the fix into your offer. Since the two-year ownership rule was abolished you can begin a statutory extension claim immediately after completion, so the premium for extending to a peppercorn is a knowable cost you can bring to the negotiation.

The legal questions here belong with your conveyancer, and the valuation of an escalating rent stream with a valuer who does enfranchisement work. Where the flat is or will become a rental, the tax layer (what is deductible, what is capital, and how the ground rent line feeds your portfolio's real return) is worth a conversation with a property tax specialist before you structure the purchase, because the deductibility fork above is much easier to get right at the start than to unpick in a later return.