Ground rents and long leases: new law in place for 2026
Jan 20
4 min read
0
50
From December 2025, an important legal change removed a long-standing risk affecting some leasehold flats with higher ground rents such as doubling or onerous ground rents.
This is broadly good news for leaseholders in removing so called AST trap (assured shorthold tenancy), which meant that ground rents above a certain level meant that a long lease could be considered an AST, meaning the lease could be terminated without following a the formal forfeiture procedure, with its built-in protections for leaseholders against losing their biggest asset, their home.
If you own, are buying, or plan to sell a leasehold flat, it is worth understanding what is changing, what is staying the same, and where problems can still arise.
Why ground rents have caused problems for long leases
Historically, some long residential leases have fallen into a legal category known as an assured shorthold tenancy under the Housing Act 1988.
This could happen where:
the ground rent exceeded £250 per year outside London, or
£1,000 per year in London.
This was largely an academic point; the landlord theoretically gained stronger possession rights if ground rent was unpaid, a risk that sat very uneasily with the idea of a long-term residential lease which in the ordinary course of things benefits of a series of protections designed to make the forfeiture of a residential lease difficult without plenty of notice to the leaseholder.
This issue became known as the “assured tenancy trap”, and it caused genuine concern for buyers and mortgage lenders. in reality, it meant that a lot of tick-box conveyancing firms would advise buyers not to proceed to buy a lease caught by this issue, which in turn caused whole chains to fall apart, completely unnecessarily in our view.
How conveyancers dealt with the risk in the past
Ideally, the solution was to vary the lease to reduce the ground rent although this meant the costs of two solicitors and required landlord to agree, which often meant a premium being payable because there was no legal right of the leaseholder to require this from the freeholder.
Where that was not possible or was cost prohibitive, some transactions proceeded with Housing Act indemnity insurance, designed to cover the narrow risk of a landlord relying on assured tenancy rules.
That approach was understandable at the time, but it came with an important limitation:
the insurance did not change the lease
the ground rent terms themselves remained exactly the same
In other words, the underlying lease 'problem' was often left unresolved (again, not in our view a substantial issue being that there were no reported costs of a long lease being lost due to a possession claim on the basis of it being an AST).
What is changing from 27 December 2025
From 27 December 2025, long residential leases will no longer be capable of being assured tenancies at all.
In practice, this means:
the assured tenancy risk disappears entirely
landlords will no longer be able to rely on Housing Act possession grounds for long leases
Housing Act indemnity insurance becomes redundant
For new transactions, that type of insurance will serve no practical purpose once the new regime is in force.
Why high ground rents are still a problem
This is the key point that is often misunderstood and why this update is more of something to appease the academics in the legal world that resolving the real issue of onerous ground rents.
The December 2025 change:
removes a legal technical risk
but does not fix high or onerous ground rents by changing them
A ground rent can still be problematic where:
the starting rent is higher than 0.1% of the flat value
it increases aggressively (for example, doubling every 10 years s or increases by the RPI every 5 years)
it is out of proportion to the property’s value
These are precisely the issues that often lead leaseholders to consider a statutory lease extension as extending a lease educes the ground rent to a peppercorn automatically, and this cannot be denied by the freeholder because it is a legal right.
You can read more about this in my lease extension guidance for leaseholders, which explains how any type of onerous ground rent can be addressed through the statutory process, with a series of deadlines to ensure freeholders must reply to you.
What conveyancers should still be reporting on
Even after December 2025, good conveyancing advice will still involve:
flagging high or unusual ground rents (for example a rent linked to the resale value of the flat)
explaining escalation clauses clearly and ideally, with a clear table that shows exactly how much will be payable in 10, 20 and 30 years.
recommending valuation input where appropriate
warning about potential resale and remortgage issues
Where a ground rent is genuinely affecting value or mortgageability, leaseholders are often best served by taking early advice on a fixed fee lease extension service, rather than leaving the issue to derail a future sale.
What this means for leaseholders
If you already own a lease with a high ground rent:
the risk of an assured tenancy claim will fall away
but the ground rent may still affect value and marketability
If you are buying:
do not assume the law change makes all ground rents “safe”
unresolved issues at purchase can reappear on resale
If you were previously told indemnity insurance solved the problem, it may be worth revisiting that advice, particularly if you plan to sell, remortgage or extend your lease in the future.
A calm but important point to be aware of
This change is good news generally and should do away with the expensive and rather pointless deeds of variation requested by buyers conveyancing solicitors.
However, high ground rents remain one of the most common causes of:
aborted sales
lender refusals
unexpected lease variations later on
In sum, the best option continues to be that of replacing any sort of onerous ground rent with a peppercorn ground rent via a statutory lease extension. Looking at it another way, a sale has never fallen through due to a ground rent being a peppercorn.