The Leasehold Reform (Ground Rent) Act 2022 explained

The Leasehold Reform (Ground Rent) Act 2022 restricts ground rent on most new long residential leases in England and Wales to a peppercorn (effectively nil). Here is what it does, when it came into force, which leases are caught, and what it means if you already own a leasehold property or a freehold reversion.

The Leasehold Reform (Ground Rent) Act 2022 is one of the biggest changes to residential leasehold in England and Wales in a generation. In short, it stops landlords charging a money ground rent on most new long residential leases. Instead, the most a landlord can require is a peppercorn, which has no real financial value. This guide explains what the Act does, when it started, which leases it catches, the exceptions, and what it means whether you own a leasehold flat or a freehold reversion.

What the Act does

Before the Act, a developer or landlord could grant a new long lease and build in a ground rent, sometimes a substantial sum, sometimes one that doubled every few years. The Act puts a stop to that for new leases. On a qualifying new long residential lease, the ground rent is limited by law to a peppercorn. A peppercorn rent is a token rent of no monetary worth, so the practical effect is that no real ground rent is payable at all.

The Act also bans landlords from charging an administration fee just for collecting a peppercorn rent. You cannot dress up a banned ground rent as some other regular charge. The aim is simple: a new leaseholder should not be paying an annual ground rent for nothing in return.

When it came into force

The Act received Royal Assent in February 2022, but the rules took effect on set commencement dates:

• 30 June 2022: the main provisions came into force, covering most new long residential leases.
• 1 April 2023: the rules began to apply to leases of retirement homes, which were given extra time to prepare.

The date that matters is when the new lease is granted. A qualifying lease granted on or after the relevant commencement date is caught. The Act does not reach back and rewrite leases that already existed before those dates.

What counts as a peppercorn rent

A peppercorn ground rent is the legal term for a token rent that has no real value. Centuries ago a landlord might literally have asked for one peppercorn a year to keep the lease technically valid. Today the phrase simply means the lease can record a ground rent in name, but nothing of any monetary worth can be demanded. So a leaseholder on a peppercorn rent pays, in effect, nothing.

This is different from a money ground rent, where a real annual sum (for example a few pounds, or in some older leases a much larger and rising figure) is payable to the freeholder.

Which leases are caught (and the exceptions)

The Act applies to a qualifying new long residential lease in England and Wales: in broad terms, a new lease of a single dwelling, granted for a term of more than 21 years, for a premium (a one-off purchase price), on or after the relevant commencement date. These are the everyday leases most people think of when they buy a leasehold flat or house.

Several types of arrangement are outside the Act and are not affected by the peppercorn rule:

• Business and commercial leases, where the property is let for business use rather than as someone's home.
• Statutory lease extensions, which are dealt with under their own separate leasehold legislation rather than by this Act.
• Community housing leases, broadly leases granted by community land trusts and certain co-operative housing bodies.
• Home finance plan leases, such as certain regulated home purchase arrangements.

Because the boundaries of these categories can be technical, anyone unsure whether a particular lease is caught should check the current government guidance or take legal advice on the specific lease.

Which transactions may be affected

The clearest case is buying a brand new leasehold flat or house from a developer: a qualifying new lease granted after commencement must be at a peppercorn rent. Some other situations can be caught too, for example a voluntary lease extension agreed directly with the freeholder, where the new lease takes effect after commencement and meets the qualifying conditions, or the grant of a fresh long lease that replaces an old one. The general principle is that it is the grant of a new qualifying lease that triggers the rules, not simply living in an existing leasehold property.

Who benefits

The main winners are future leaseholders: anyone taking a new qualifying long lease after the relevant date. They get the security of knowing no money ground rent can be demanded, which removes the risk of escalating ground rents and the problems those have caused with mortgages and sales. It also makes new leasehold homes simpler to value and easier to sell on.

What it means for existing leaseholders

This is the part that is most often misunderstood, so it is worth being careful. If you already hold a lease that was granted before the Act came into force, the Act did not automatically cut your ground rent to a peppercorn. Your existing lease terms continue to apply, and a money ground rent set out in that lease generally remains payable.

The government has signalled that it wants to go further and help leaseholders with existing ground rents, and further reform has been moving through Parliament and consultation (including the wider Leasehold and Freehold Reform Act 2024 and proposals about capping existing ground rents). As of 2026 that work is still ongoing, and there is no confirmed date on which existing ground rents will simply be abolished. Until any such change actually takes effect, an existing money ground rent remains due. We cover the moving picture in is ground rent being abolished?

If you want out of an existing ground rent sooner, the established routes still apply: a statutory lease extension or buying the freehold (enfranchisement) can each reduce or remove the ground rent, though these are separate processes governed by their own rules.

What it means if you're a freeholder

If you own a freehold reversion and collect ground rents on existing leases, those arrangements are not rewritten by the 2022 Act. You can still demand the ground rent your existing leases provide for, in the usual way and with the correct paperwork.

The change bites when you grant a new qualifying lease. From the relevant commencement date, a new qualifying long residential lease must be at a peppercorn rent. Charging or even accepting a prohibited ground rent on such a lease can lead to a financial penalty enforced by trading standards, and you would have to repay any prohibited rent taken. In practice this means reviewing how any new leases are drafted so they do not include a banned ground rent or a disguised charge in its place. Keeping existing and new leases clearly distinguished, and demanded under the right rules, is exactly the kind of record keeping a small portfolio needs, and it is built into how ChiefRent handles each property.

A note on scope: this is general information about the Leasehold Reform (Ground Rent) Act 2022, not legal advice on your particular lease or property. The law in this area is changing, so check the current government guidance, and speak to a solicitor about your specific situation before acting.