Ground Rent Reform and Lease Extensions: What Applies Now (and What Doesn’t)

There has been a lot of commentary recently about proposed ground rent reform and the suggestion that ground rents on existing leases will be capped or removed. Unsurprisingly, many leaseholders are now asking whether this affects lease extension valuations today.

The short answer is no – not yet.
But understanding why is important before making any decisions.

Why ground rent reform is being proposed

Ground rent on new long residential leases was effectively abolished in 2022. However, millions of leaseholders with older leases were left paying ground rents that can be high, escalating, or problematic for mortgage lending.

The Government’s latest draft legislation proposes to address this by extending reform to existing leases, with the intention of capping – and ultimately eliminating – ground rents.

This has led to understandable confusion, particularly for leaseholders considering a lease extension.

Does the new ground rent reform apply immediately?

No.

The proposals form part of draft legislation and do not take effect automatically. Even once the Bill becomes law, the ground rent provisions will only apply when brought into force by separate commencement regulations.

At the time of writing:

• No commencement date has been confirmed

• The level and structure of any cap has not been finalised

• Transitional rules have not yet been published

Until that happens, existing law remains in force.

Is there a £250 ground rent cap now?

No.

There is no current statutory £250 cap on ground rent for existing leases.
The £250 figure is often mentioned because it appears in other areas of housing law and lender guidance, but it is not part of the current lease extension legislation, nor is it fixed in the new proposals.

Any future cap will be set through regulations, not assumptions.

How should lease extensions be valued right now?

If you are extending your lease today, the valuation must:

• Be carried out under the current statutory framework

• Use the actual ground rent payable under your lease

• Ignore proposed but uncommenced legislation

It would not be appropriate (or defensible) to assume:

• A future rent cap

• A peppercorn ground rent

• A reduced landlord interest based on proposals alone

This is particularly important if the matter could proceed to Tribunal.

Can future reform still help in negotiations?

Yes – but indirectly.

While future reform cannot be built into a formal valuation, it can:

• Influence negotiation strategy

• Encourage pragmatic settlements

• Reduce the appetite for landlords to rely on long-term ground rent income

In practice, we are already seeing this reflected in some negotiations.

 Should you wait to extend your lease?

That depends on:

• The length of your lease

• Your ground rent terms

• Whether you are selling, refinancing, or staying put

• Your risk tolerance if reform is delayed

Future reform is likely to reduce premiums, but short leases continue to lose value. Waiting is not always the cheaper option.

How Olden Property can help

We provide:

• Independent, RICS-compliant lease extension valuations

• Clear advice on current law vs future reform

• Negotiation support grounded in evidence, not headlines

If you are unsure whether to proceed now or wait, early advice can make a material difference.