An overview of the Leasehold Reform (Ground Rent) Act 2022

What is ground rent?

If you own a long lease on a property in England and Wales, you will normally have to pay ground rent to the freeholder or landlord of the property.

Ground rent was originally introduced to allow low-income buyers to enter the housing market by reducing the cost of homeownership. 

The lease will usually stipulate how much ground rent you must pay and when you must pay it. Typically, the rent will be quite low and is often in the region of £50 per year. 

This is sometimes paid in one instalment or may be payable half-yearly or quarterly.

Ground rent can be fixed or escalating. If it is fixed, it means that it remains unchanged throughout the lease term. Escalating ground rents will increase during the course of the lease. The lease will specify when the ground rent increases and by how much.

Changes to ground rent

The Leasehold Reform (Ground Rent) Act 2022 (LRGRA 2022) will limit the ground rent chargeable to a peppercorn per annum on most long leases.

The LRGRA 2022 only applies to informal lease extensions, not the statutory route. The informal route is where the leaseholder simply contacts their landlord (usually the freeholder) to try and negotiate a lease extension. 

There are no rules if the leaseholder uses this route, and the landlord could refuse to extend their lease or ask whatever price they like. 

For more information, please see our page on lease extensions and enfranchisement.

LRGRA 2022 applies to “regulated” leases. To be a regulated lease, the lease must be:

• a long lease of a single dwelling, i.e. one granted for more than 21 years; and
• granted for a premium; and
• after the relevant commencement date (unless pursuant to a contract made before that date); and
• which is not an “excepted” lease.

Excepted leases include:

• Certain business leases
• Statutory lease extensions of a house or flat
• Community housing leases
• Home finance plan leases

Following a 2018 consultation, the LRGRA 2022 has now received royal assent, though not yet fully in force. 

The Act will be brought into enforcement within six months, at a date specified by the Secretary of State for regulations.

Sanctions for non-compliance

If ground rent is demanded in contravention of this Act and any payment received is not returned within 28 days, the landlord will face a fine ranging from £500 - £30,000 per qualifying lease.

Additionally, a leaseholder under a qualifying lease has the right to apply to the First-Tier Tribunal (Property Chamber) in England for a declaration that a term reserving prohibited ground rent is replaced with a peppercorn rent.

The Act also bans freeholders from charging administration fees for collecting a peppercorn rent and enforcing the charging of prohibited ground rent through a civil penalty regime, including fines of up to £30,000 for freeholders that charge ground rent in contravention of the Act. 

Contact our lease extension solicitors 

If you have any questions, please do not hesitate to contact our team. Our solicitors have extensive experience in a wide range of areas, including collective enfranchisement, lease extensions, and the right to manage.

SO Legal has solicitors and licensed conveyancers in Brighton, Eastbourne, Hastings, London and Uckfield, and we work with clients across the UK.