Ground Rent's Finally Capped
What the New Ground Rent Cap Means for Landlords and Buyers
Ground rents on existing and future leasehold properties will be capped at £250.00 per year
This week brought important changes to leasehold law that will have far-reaching implications for landlords, homeowners, and prospective buyers. The Government has confirmed that ground rents on existing and future leasehold properties will be capped at £250.00 per year — a landmark reform that fundamentally alters the dynamics of leasehold ownership in the UK.
For many landlords, particularly those with leasehold properties, the issue of escalating ground rents has been a source of frustration and financial uncertainty. This change is designed to address those challenges and restore confidence in the residential property market.
What’s Happening With Ground Rents?
Traditionally, many leasehold arrangements included ground rents that increased over time, often doubling every 10 or 15 years. While these arrangements were originally set up to deliver predictable income, in practice they have caused significant problems:
Rapidly rising costs for leaseholders;
Mortgage lenders refusing to provide finance on properties with ascending ground rents; and
Decreased marketability of affected properties due to restricted lending options.
The new rules cap ground rents at £250.00 per year and this applies to both new leases going forward and critically, existing ground rents that currently rise on a leasehold property.
Why This Matters to Landlords
Many landlords will have already felt the pressure from this issue. The challenges have not been limited to individual homeowners, landlords with leasehold investment properties have also been negatively impacted.
Reduced Tenant Demand and Valuations
Properties with escalating ground rents have been harder to sell and let because:
Prospective tenants and buyers are concerned about future costs;
Some buyers have been unable to secure mortgages;
Valuers and lenders have marked down values due to perceived risk.
This has had a direct impact on landlords’ ability to realise value and manage portfolios efficiently.
Mortgage Lending Challenges
Over the past several years, numerous mortgage lenders have refused to lend on leasehold properties where ground rents escalate significantly over time. The reason? Lenders assess the cost a buyer may face over future years and, if ground rents escalate unsustainably, they consider it a risk that may impact a borrower’s ability to repay. This has particularly affected:
First-time buyers, who often have limited deposit funds;
Buy-to-let investors who require financing to grow their portfolios; and
Buyers in value-constrained areas, where additional costs are untenable.
In many cases, lenders simply decline mortgages on a property with rising ground rents, or offer only higher-cost lending options.
What This Cap Really Means
The introduction of a £250.00 annual ground rent cap is a positive development for everyone involved:
For Leaseholders
• Greater predictability in long-term housing costs
• Easier access to mortgage finance
• Renewed confidence in property ownership
For Landlords
• Improved marketability of leasehold investment properties
• Fewer valuation and financing obstacles
• More buyers able to secure mortgages, increasing liquidity and demand
Instead of ground rents doubling every decade, landlords can now collect a modest, predictable income stream while ensuring the properties remain attractive to both owner-occupiers and tenants.
A Step Toward Fairer, More Stable Property Markets
While this reform may reduce the potential long-term income from ground rents, it removes the volatility and uncertainty that have burdened leaseholders and landlords alike. In practical terms, there have been many cases where homeowners have been unable to sell their residential properties due to escalating ground rents contained within their leases. This has resulted in some owners becoming effectively trapped in their homes, unable to progress to a larger property or relocate to a different area.
It also tackles one of the key blockers in the housing market, the inability of buyers to secure mortgages - which has disproportionately affected first-time buyers and those on lower incomes.
This change represents a significant shift in leasehold policy, one that aligns the interests of landlords, tenants, and homebuyers toward a fairer and more sustainable property market.
For landlords who have felt the strain of rising ground rents and restricted buyer demand, this new cap offers clarity and reassurance. For buyers, it opens doors that were previously closed due to mortgage restrictions and escalating costs.
Overall, it’s a win for the UK housing market and a change worth understanding.