Ground rent

Ground rent is a payment made by a leaseholder to a freeholder under the terms of their lease. A freeholder owns both the property and the land it is built on outright. A leaseholder owns the property for the term of years granted by the lease, but not the land it is built on. So sometimes a lease will require the leaseholder to pay ground rent, it is a payment to rent the ground that the property is built on.

Ground rent is only payable where it is specified in the lease agreement.

The Leasehold Reform (Ground Rent) Reform Act 2022 restricts new ground rents to a peppercorn. This means that no new ground rents can be created in leases that are granted after June 2022, however it does not affect those payable under existing leases.
The government recently carried out a consultation on restricting ground rents on existing leases, but has made no decisions on this at the time of writing.

A peppercorn rent is a nominal or symbolic payment with historic origins. It is a way to satisfy the requirement for a contract to have a valuable consideration without burdening the leaseholder with significant costs. The lease may state some other nominal payment is required such as £1. In practice the payments of actual peppercorns or other nominal rents are not demanded by the landlord.

No, rent is a regular payment that a leaseholder or tenant pays for the right to live in a property. If you are a shared owner you will pay rent on the share of the property retained by the landlord. This is not ground rent and you will continue to pay rent.

Although Home Group ground rents are relatively small amounts, we know ground rents that increase during the course of the lease can cause problems for our customers when it comes to selling or remortgaging their property.

As no service is received in return for the ground rent, we share the views of the government and our customers that seems an unfair and unnecessary charge. It is not clear whether the government will proceed with any kind of restriction on existing ground rents. As a progressive provider of affordable homes we want to cut costs where possible for both our existing and future leaseholders, so regardless of any future legislative changes we will no longer collect ground rent with immediate effect.

We will continue to make these payments and absorb the cost but we will no longer recharge these costs to our customers.

If you are a shared owner and we currently pay ground rent and service charges to a freeholder on your behalf, if you staircase to full ownership you will need to pay your service charges (and potentially ground rent) directly to the freeholder.

If your lease states that ground rent is payable then in theory if Home Group were to dispose of its interest, then it is possible that you may be required to pay ground rent to any new landlord. This is because this is a Home Group policy decision and not legally binding on future landlords unless the lease is varied accordingly.

Home Group have made the policy decision not to charge ground rents. We do not propose to vary your lease, if you do wish to have your lease varied you will be responsible for meeting the legal costs associated with that.

This is a policy decision which affects ground rents due from 1st April 2024 onwards, payments made prior to that date were demanded in accordance with your lease and will not be refunded.