Understanding Ground Rent Reform UK
At the centre of the proposals is a statutory cap of £250 per year on ground rents, with a further reduction to a peppercorn rent after 40 years. While the legislation is not yet law, it represents a substantive shift in policy and intent and one that resident-led companies should begin to understand now.
At JMJ Asset Management, we believe good governance starts with clarity. This article explains what is being proposed, why it matters, and what RMCs and RTMs should be thinking about as reforms progress.
What Is being proposed?
1. A hard cap on ground rent
Ground rent payable under qualifying leases would be capped at £250 per year, regardless of what the lease currently states.
This is an important distinction. The cap would apply to the actual contractual rent, not just to how that rent is treated for valuation or enfranchisement purposes. For more background on how these provisions appear in typical leases, you may find our guide to what your lease actually says helpful.
2. A long-term reduction to a peppercorn
After 40 years, the ground rent payable would reduce to a peppercorn, which is effectively nil.
This introduces a clear end point to ground rent liability, something that many leases currently lack.
3. Application to existing leases
Unlike previous reforms that focused largely on new leases, this proposal applies to existing long leases, aiming to address historic issues rather than only preventing future ones.
Why ground rent has become such a problem
Ground rent has long been one of the most contentious aspects of leasehold ownership.
In many cases, it provides little or no service in return, yet can have a disproportionate impact on:
- Mortgageability, particularly where rents are high or escalate
- Resale prospects, with buyers increasingly cautious
- Valuations, especially for flats in blocks with onerous lease terms
- Resident confidence, where lease terms feel unfair or unclear
Escalating ground rents in particular have caused real difficulties for leaseholders trying to sell or remortgage, even where buildings are otherwise well managed.
The proposed cap is clearly intended to remove this friction from the system.
What this means for RMCs and RTMs
For Resident Management Companies (RMCs) and Right to Manage (RTM) companies, the proposals bring both reassurance and responsibility.
Greater predictability
A capped and time-limited ground rent structure reduces uncertainty for residents and boards alike. Predictability supports better long-term planning and clearer communication with leaseholders.
Reduced conflict
Ground rent is often a source of misunderstanding and frustration, particularly where freeholders are involved. Simplifying and limiting its impact may help reduce tension within blocks.
Improved market confidence
Blocks that are easier to mortgage and sell within are healthier communities. This benefits residents, directors and managing agents by reducing churn and disputes.
Governance considerations
While ground rent is typically collected by the freeholder, RMCs and RTMs are often asked questions by residents. Directors need to understand how reforms may affect lease interpretation, financial expectations and future decisions.
What happens next?
It is important to stress that this is draft legislation. The proposals may evolve as the Bill progresses through Parliament, and timelines are not yet fixed.
However, the direction of travel is clear.
Leasehold reform continues to move toward:
- Reducing financial burdens on leaseholders
- Increasing fairness and transparency
- Improving confidence in the long-term sustainability of leasehold living
For resident-led companies, being aware of these changes now helps avoid surprises later.
How JMJ supports resident-led companies
At JMJ Asset Management, we work closely with RMCs and RTMs to help them navigate an increasingly complex regulatory landscape.
We do not believe in alarmism or over-complication. Our role is to:
- Explain legislative change in clear, practical terms
- Help boards understand how reforms may affect governance and decision-making
- Support confident, informed communication with residents
Financial clarity also plays an important part in strong governance, and our guide to what leaseholders should look for in end of year accounts offers additional insight.
By keeping a close eye on leasehold reform, we help our clients stay prepared, not reactive.
JMJ ensures that minutes are prepared and issued promptly, providing a clear and accurate record of discussions and decisions. Actions arising from the meeting are logged and tracked, and any changes to directors or company details are progressed as required. This continuity ensures that AGMs lead to meaningful outcomes rather than unresolved discussion.
Looking ahead
Ground rent reform has the potential to remove one of the most persistent sources of friction in leasehold property. If implemented as proposed, the £250 cap and eventual move to a peppercorn rent would mark a meaningful reset.
For RMCs, RTMs and leaseholders alike, reduced uncertainty supports better outcomes, stronger governance and smoother management.
As the legislation develops, JMJ Asset Management will continue to monitor ground rent reform UK progress and provide clear, timely insight for the residents and boards we work with.
