Ground Rent Explained: What It Is, Escalation Clauses and the 2022 Act

A 'peppercorn' ground rent is a token rent of no real monetary value: the legal way of saying no ground rent is actually payable. Since the Leasehold Reform (Ground Rent) Act 2022 came into force, most new long residential leases in England and Wales can only charge a peppercorn. Share-of-freehold flats also typically run on a peppercorn. This is the gold standard: nothing to pay and nothing to escalate.

A fixed ground rent is a modest annual sum that does not increase (or increases only in line with a transparent, reasonable measure). It is an ordinary, manageable cost. The thing to confirm in the lease is that it genuinely is fixed, and not subject to a review clause that ramps it up later. Check the ground-rent clause in the lease before you offer.

Some leases review ground rent periodically in line with the Retail Prices Index (RPI). This is more defensible than a doubling clause because it tracks inflation rather than multiplying, but it still means the rent rises over time, and the review frequency matters. Read the exact wording; an RPI review every 25 years is very different from one every 5 years.

Doubling ground rents are the clauses that triggered the leasehold scandal: a rent that doubles every 10, 15 or 25 years compounds into very large sums and can make a property unmortgageable and hard to sell. Lenders tightened their stance and many freeholders agreed to reform onerous terms. If a lease has a doubling clause, treat it as a serious price-affecting issue and take legal advice. It may be possible to vary the lease or extend it to reset the rent.