Explaining leasehold reform & what justice for property rights is campaigning for
What is ground rent?
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Ground rent is a contractual payment written into a lease. It is not a service charge. It forms part of the legal and financial structure of the lease itself.
It is important to understand that:
A lease is both:
a contract, and
the grant of a property interest (a term of years)
The total consideration paid by a leaseholder includes:
an upfront premium, and
an ongoing ground rent
Ground rents, therefore, form part of the consideration for the grant of the lease itself. Services such as maintenance and insurance are paid for separately through service charges. This distinction is fundamental.
Mischaracterising ground rent as “payment for nothing” misunderstands the legal and economic structure of leasehold property.
What has made ground rents an issue?
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Historically, many ground rents were low and stable.
Some problematic practices emerged in the 2000s and 2010s, in which builders sold low-cost flats with high ground rents that doubled every 10 years.
Those were concentrated, not universal.
Regulators, builders and large investors have already resolved the majority of these cases, enabling the reduction of ground rents and the removal of doubling clauses.
Legislation to target these few remaining aberrations is supported by our group.
J4PR strongly supports action against exploitative practices, and perpetrators are not welcome in our group
What is the government now proposing?
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New proposals from the government go further by seeking to reduce ground rents on existing leases, potentially applying:
A fixed cap of £250 per annum with no future increases allowed for inflation
After 40 years, all ground rents will become zero
New formula to massively reduce the price of lease extensions
This represents a fundamental shift:
from reforming future practice
to alter existing contractual rights
What is the situation in 2026 and beyond?
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Reform has already happened for many new leases, and the vast majority of problematic agreements have been addressed through prior legislation
Our concern as a group is that the new legislation being proposed is now moving from future reform to changing existing contractual rights
That is the dividing line in this debate. It threatens honest investments made by well-meaning savers and undermines contract law, as outlined since 1215 in the Magna Carta
who and What does this impact?
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Millions of people entered into legal, binding agreements in good faith.
Ground rents were clearly set out in leases
Investors priced deals based on those terms
Retrospective changes risk rewriting contracts after the fact
Why that matters:
If the government can change agreed terms after the deal is done, it raises a fundamental question: how secure is any contract? -
Ground rent portfolios are widely held as income-generating assets.
Often owned through pensions, SIPPs, or long-term savings vehicles
Provide predictable, low-risk income streams
Used by individuals planning for retirement, not just institutions
Why that matters:
Policy changes could reduce or eliminate expected income, directly affecting people who rely on it for financial security later in life. -
A large proportion of ground rent owners are ordinary investors.
Individuals who bought small portfolios
Landlords diversifying modest holdings
People who invested based on professional advice
Why that matters:
The impact isn’t confined to large corporations; it disproportionately hits private individuals without the resources to absorb losses -
The freeholds of many buildings are owned by the leaseholders themselves through shared or collective structures. However, not all the leaseholders participated in the purchase of their freehold, forcing their fellow leaseholders to not only pay for the cost of their own flat, but also to pay for these other non-participating flats too.
Flat owners who rely on stable income and have increased their mortgages to fund these purchases will be in financial jeopardy if lease extensions and ground rents are massively reduced.
These types of changes can also disrupt how these structures are funded and managed.
Why that matters:
Reforms could unintentionally penalise residents who effectively own and manage their own buildings. -
The UK has a global reputation for strong, predictable property rights.
Investors trust that rules won’t change arbitrarily
Legal frameworks underpin lending, investment, and development
Retrospective reform introduces unprecedented uncertainty into the system
Why that matters:
Undermining legal certainty risks weakening the UK’s position as a stable place to invest.
What do we propose as an alternative?
We want to offer a proportionate policy framework for a complicated legal issue
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Target abuse directly to focus on genuinely unfair lease terms
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Maintain prospective reform and continue improvements for future leases
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Distinguish between cases to differentiate between exploitative practices and legitimate arrangements
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Establish clear compensation principles and define:
fair value
valuation methodology
eligibility
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Ensure legal robustness with swift resolutions for disputes
Avoid prolonged litigation and uncertainty for current investors
HOW DOES THIS ISSUE PLAY OUT IN Reality?
Under the 2024 Leasehold and Freehold Reform Act, changes may be introduced that would cause a huge transfer of wealth, almost overnight.
This would shift substantial value from freeholders to leaseholders, including those leaseholders who deliberately bought short leases at a discount.
This is best illustrated by an example. A person chooses to buy a flat in a pleasant area with a 55-year lease for £250,000 in cash, rather than paying £350,000 for a long lease equivalent. Under existing legislation, a lease extension would cost them around £65,000, so this represents a good discount for this cash buyer.
A middle-aged saver purchased the freehold of the building (including this flat) as an investment for their pension for £55,000; knowing they could rely on making a profit within the next 25 years from a lease extension of this flat. If the 2024 law is enacted, the cost of the lease extension would drop by a minimum of £30,000 – the saver would lose more than half of their money which would be given as a windfall to the flat’s cash buyer.
That raises a basic fairness question: how can this huge transfer of wealth be fair or proportionate without fair market rate compensation to savers?
Why should retrospective changes to flat leases completely undermine an existing contract and market, where both parties would have had legal representation at the time of purchase?
The Government’s 2024 impact assessment states that there are 385,400 flats in the UK with less than 80 years remaining on their leases. Most of these flats are based in London and the south-east, with 60% owned by private buy-to-let landlords (of which 10% - 25% are based overseas).
According to the Government’s own figures, over £18.7 billion pounds in damages could be claimed in the courts by freeholders by all this. Why should the wider system, or ultimately the taxpayer, bear these costs?