Ground Rent on New Builds After 2023: What Changed and Why It Still Matters When Buying Second-Hand New Builds

The Law as It Stands: Zero Ground Rent on New Leases

The Leasehold Reform (Ground Rent) Act 2022 came into force on 30 June 2022 for most regulated leases in England and Wales. From that date, landlords are prohibited from charging ground rent above a "peppercorn" — effectively zero — on new regulated residential leases. A landlord who charges ground rent above peppercorn on a regulated lease commits a criminal offence punishable by a civil penalty of up to £30,000.

For buyers of brand new leasehold properties — predominantly flats — completed after June 2022, this means you will not pay ground rent. Your service charge (covering building management, maintenance, and insurance) remains payable and is not affected by the Act, but the separate "ground rent" line item that generated so much controversy in the 2010s is gone.

The Act is clear and its protections are meaningful for buyers of genuinely new properties. However, the Act explicitly does not apply retrospectively to leases granted before 30 June 2022. Millions of existing leaseholders remain bound by the pre-2022 terms of their leases, including doubling ground rent provisions.

Why This Still Matters: Second-Hand New Builds

The issue of pre-2022 ground rent clauses does not disappear simply because new leases now carry peppercorn ground rent. When you buy a second-hand new build — a property originally sold as new between approximately 2012 and 2022 — you may be buying into a lease with a problematic ground rent provision.

A property sold as a "new build" flat in 2017 on a 125-year lease with an initial ground rent of £300 per annum, doubling every ten years, now has a ground rent of £600 per annum (having doubled once by 2027). By 2037 it will be £1,200; by 2047 it will be £2,400. The lease is eight years old and has 117 years remaining. This is not a historical curiosity — it is an active liability that affects the property's mortgageability and saleability.

Before buying any second-hand property built between 2000 and 2022, instruct your solicitor to review the lease ground rent provisions in full. Specifically:

**What is the initial ground rent?** Any ground rent above £250 per annum (£1,000 in London) historically triggered Section 8 of the Housing Act 1988, giving the landlord a right to seek possession — creating a technical mortgage lender red flag. This threshold issue has been addressed by the 2022 Act for new leases but persists in old leases.

**What is the review mechanism?** Is it linked to doubling (e.g. "doubles every ten years")? Linked to RPI? Fixed for the lease term? Doubling ground rent provisions are the most problematic.

**What is the review period?** Doubling every ten years is more problematic than doubling every twenty-five years, though both can create issues depending on the initial ground rent level.

Mortgage Lenders and Pre-2022 Ground Rent Provisions

UK Finance (the mortgage industry trade body) and the major high street lenders have published guidance on what ground rent provisions are acceptable as security for a mortgage. Key thresholds:

• Ground rent must not exceed 0.1% of the property value per year at any point in the lease term (so for a £300,000 flat, ground rent must remain below £300 throughout — which many pre-2022 doubling leases will breach)
• Where ground rent doubles more frequently than every 25 years, many lenders will refuse to lend
• Where the review mechanism means ground rent will exceed the 0.1% threshold within the mortgage term, lenders will refuse to lend

If a property has a pre-2022 ground rent clause that breaches these thresholds, you may find you cannot get a mainstream mortgage on it. This makes the property effectively unmortgageable and therefore difficult or impossible to sell — recreating the exact problem that affected thousands of buyers in the 2015–2022 period.

Remedies for Pre-2022 Leaseholders

Existing leaseholders with problematic ground rent clauses have several potential remedies:

**Statutory lease extension.** Exercising the right to extend the lease under the Leasehold Reform, Housing and Urban Development Act 1993 — as amended by the Leasehold and Freehold Reform Act 2024 — extinguishes the ground rent and replaces it with a peppercorn for the extended term. This removes the doubling ground rent problem but costs money (the premium for the extension, legal fees, and the lender surveyor fee if a mortgage is involved).

**Deed of variation.** Some freeholders — particularly those who are developers or whose freehold was sold to a ground rent fund — may agree to vary the ground rent clause by deed, replacing it with a peppercorn. This requires negotiation and the freeholder has no legal obligation to agree. The cost of a deed of variation is typically lower than a statutory lease extension.

**Collective enfranchisement.** Where the majority of leaseholders in a building choose to collectively purchase the freehold, the ground rent obligation ceases entirely. The Leasehold and Freehold Reform Act 2024 has made collective enfranchisement cheaper and more accessible.

Store all lease documentation, any correspondence with the freeholder about ground rent, and any deed of variation or lease extension documentation in your Property Passport UK new build passport. This paperwork is essential for any future mortgage application or sale.