Ground Rent and Service Charges
Annual leasehold costs beyond the mortgage
Ground rent is a payment a leaseholder makes to the freeholder for the land, and buys nothing in return. A service charge is the leaseholder's share of maintaining the building, its grounds and its insurance. Both are set by the lease, and the service charge varies each year with actual costs. Ground rent rules differ across the UK nations.
What This Means
You pay both on top of your mortgage for as long as you hold the lease. Neither is capped, and a major works bill can arrive on top of the annual charge. The figures shown are the last recorded ones, and a service charge is reviewed every year. Propbar flags ground rent at £250 a year, or £1,000 in London, as potentially onerous. This is one of the few things on this report that lenders and insurers price directly: some lenders cap the ground rent they will accept, and decline leases whose rent doubles or escalates.
Practical Advice
- Ask the seller's conveyancer for the last three years of service charge accounts and any major works notices.
- Get your conveyancer to read the ground rent review clause and confirm whether the rent doubles or rises with inflation.
- Ask the managing agent for the reserve fund balance and any planned works over the next five years.
- Ask your broker whether this ground rent level is acceptable to the lender you intend to use.
- Request the buildings insurance schedule and the commission the freeholder or agent takes from it.
Key Points
- New long residential leases granted since 30 June 2022 cannot charge more than a peppercorn ground rent, so a new-build flat should show nothing here.
- Doubling clauses, where ground rent doubles every ten or fifteen years, made some 2010s new-build leases unmortgageable and unsellable.
- A landlord must consult leaseholders before major works costing any one leaseholder more than £250.
Additional Information
The draft Commonhold and Leasehold Reform Bill of 27 January 2026 would cap ground rent on pre-2022 leases. The cap would be £250 a year for 40 years, then a peppercorn. It is not law. Scotland has no ground rent on homes. Northern Ireland lets leaseholders buy out ground rent under the Ground Rents Act (Northern Ireland) 2001.