Ground Rent Scandal – What You Need to Know


Ground Rent Scandal

The ground rent scandal – sometimes referred to as the leasehold or ‘fleecehold’ scandal – caught national media attention back in 2017.

Well-known housing developers incorporated clauses into their lease contracts that obliged owners to pay increasing ground rents.

These charges were not explained clearly when the houses were sold.

Some people have also been unfortunate enough to be subject to ‘hybrid’ clauses.  These effectively mean that their ground rents double every 10 years – sometimes over a lesser period.

The Result?

These escalating ground rent clauses have had disastrous consequences on people’s livelihoods.

Added to mortgage payments, bills and other financial obligations, owning these properties has become unaffordable for many.

Indeed, some leaseholders could end up paying close to £10,000 a year by 2060 (from what originally started as a few hundred pounds).

To make things worse, with the vast majority of mortgage lenders reluctant to lend on properties with these underlying issues, these properties can only be sold to cash-only buyers.

Many people who have bought these properties are, in effect, mortgage prisoners.

Does This Apply to All Leasehold Houses?


Although there are houses across the UK where the owners do not own the freehold, the leases are usually for a very long period (often starting at 999 years).

Ground rents are minimal with homeowners paying as little as £1 a year or even a peppercorn rate.

Some Further Background to the Leasehold Scandal

The ground rent (leasehold) scandal dates back to the early 2000s.

A number of new build house developers began retaining ownership of freeholds at a pace never seen before.  These leases were also granted over lesser periods than is normally the case.

Many buyers of these properties were advised that it would only cost a small amount to buy the freehold interest eventually.  But, when they attempt to move forward, the costs prove to be extortionately high.

Others were told that they were buying into a virtual freehold or, worse still, there is no difference between a leasehold and a freehold.  Many still proceeded out of fear of having to pay exit fees.

It has also emerged that these freeholds have been sold as investment opportunities to institutional funders (see below).  In other words, the original developer has not only made a further profit but can no longer be held responsible.

Furthermore, the new freehold owners exploit legal loopholes that force leaseholders to pay their legal fees when they attempt to take them to court.

This, shockingly, applies even if the leaseholder were to win the case.

What’s Being Done About the Leasehold Scandal?

If you’re facing this situation, you may take some comfort in knowing that you’re not alone.

The Leasehold Knowledge Partnership estimates that at least 100,000 property owners are seeing their ground rents increase unfairly.

In response to the outcry and gross unfairness of this saga, the government has taken a certain degree of action to reform the law.

For instance, some of the country’s foremost development companies signed a government-led collective pledge.

This promises to stop trapping people in this way when buying a new build house.

The signatories have also agreed to:

  • Identify leases that contain clauses where ground rents double more frequently than every 20 years;
  • Accept that no future leases can include doubling ground rent clauses;
  • Make contact with affected leaseholders and alter the clause.  Any increases will be in line with inflation;
  • Assist leaseholders that approach the developer requesting for a review of the doubling clause.  This would be the case even if rejected in the past (through what’s called a ‘deed of variation’);
  • Any leases will contain clear information on the cost obligations associated with the leases before its signed;
  • The ability for existing leaseholders to purchase the freehold with relative ease.

In 2019, it was further announced that houses sold on a leasehold basis would be banned.  Developers can no longer charge ground rents at all.


These reforms, however, do not help existing owners who continue to ask for their leases to be made null and void.

Many have been offered ‘deeds of variation’ which, upon investigation, barely scratch the surface.

Indeed, much more needs to be done and the situation has not been helped by a continuous revolving door of housing ministers.

It would also seem that issues such as Brexit and the coronavirus are currently taking a priority.

Competition and Markets Authority (CMA)

As a result, the Competition and Markets Authority (CMA) continues to investigate the misselling of houses in this way.

More recently leading UK homebuilders Barratt Homes, Countryside Property, Persimmon Homes and Taylor Wimpey were put under scrutiny.   The investigation focused on their treatment of leasehold house owners and whether they have been misled.

Persimmon, in their defence, agreed to halt the sale of leasehold houses in 2017.  They’ve also given leasehold house owners the right to purchase the lease at below the market value.

Taylor Wimpey Leasehold Scandal

Taylor Wimpey, somewhat commendably, set up a £130 million compensation initiative which it says is to address saleability.  It also proposes to help homebuyers obtain mortgages which, it is hoped, will make selling easier.

For many, however, it’s not enough as many of the leases were sold to an investment firm.

Furthermore, to date, the housebuilder has shown no intention of bringing the ground rent increases beyond inflation.

Affected by the Ground Rents Scandal?  Here’s What You Can Do…

If you have purchased a leasehold house and have seen your ground rents rise, there are a number of steps you can take.

Legal Action Against Conveyancers for Professional Negligence

It has emerged that 7 out of 10 leasehold house buyers used conveyancers recommended by the developer.  Some were even obliged to do so as part of the sale.

If the sale was executed without putting your best interests first, you may be able to sue the conveyancer for professional negligence.

For instance, Law Society guidelines assert that conveyancers must highlight any associated risks during the process.

After the conveyancing searches, you would have been sent a pack with the results, a summary letter and, crucially, a Report on Title.

This report should clearly explain that the house is leasehold alongside the obligations related to ground rent payments.

Approaching the Conveyancer that Dealt with the Sale

To start, it’s worth politely contacting them to explain your situation (without mentioning anything about legal action).

If genuinely in the wrong, the decent firms will do what they can to help.

However, if there were clear precautionary signs about buying the house, you may struggle to appeal the case.   This would usually be indicated by a warning of some sort – perhaps underlined or in bold.

On the other hand, if it’s just stated that your ground rent would be £X (without mentioning the exponential growth in ground rents), then the conveyancer has less of a chance.

There are some leases that state that your ground rent will double every 25 years.  Although not ideal, it’s still considered to be a fairly reasonable demand.

Much here will therefore be based on how much information you were given.  Conveyancers, by their very nature, will try and defend their positions.

Convert Tenure to Freehold

As the government has given retrospective consent for houses to be converted to freehold, you may be able to bargain with the conveyancer to work with you to better your position.

Remember to cite that, under the 1967 Leasehold Act, a leaseholder has the legal right to buy the freehold of the property you own.

However, this will not be for free and is based on calculating the level of ground rent plus factors such as inflation and other financial metrics the freeholder can legally apply.

The freeholder may also raise arguments to make things prohibitively expensive.

For this reason, provided that the other leaseholders are interested too, buying the freehold is a cost-effective way to do things.

Not only can the costs be split, but you benefit from the ‘power in numbers’ effect and can radically better your negotiating position.  We delve into this process in our post on leasehold enfranchisement.

When going down this route, it’s best to seek legal advice – especially if you’re going up against a bigger developer with deep pockets.

Never, for example, accept an informal agreement from the freeholder.

If not drafted properly, the law may not protect you.  Worse still, ambiguous clauses could put you in a worse off position.

It’s also worth talking to a solicitor about commonhold ownership.

Extend the Lease (on More Favourable Terms)

If you’re not in a position to buy the freehold, there’s a possibility that you could extend the lease.

This is a statutory obligation that freeholders must abide by under the Leasehold Reform Act.

You will have to negotiate directly with the freeholder.  However, expect a battle on your hands and some costs involved.

Undertaken in the correct manner, and you could potentially reduce your ground rent to a more manageable level – even peppercorn (i.e. zero).  Note that you must have owned the property for at least 2 years.

On this theme, it’s worth noting that the Law Commission has proposed (not implemented) that:

  • Lease extensions should have the right to extend to 990 years (i.e. much longer than 50 to 90 years);
  • Lease extensions should not come with additional obligations;
  • Long leaseholders should be able to buy out the ground rent obligations without having to extend;
  • Abolishing the ability of leaseholders to extend their lease or buy the freehold only after 2 years;
  • With enfranchisement claims, the leaseholder should not be held fully responsible for the freeholder’s legal costs.

Action Against Third-Party Investors

As mentioned above, some developers have been known to package up leases that generate extortionate ground rent income to investors.  Sadly, this sometimes without the house owners knowing.

In turn, leaseholders have no choice but to pay the extra costs.

If you’ve discovered this has happened to you, by law you should have been given first refusal (after two years of ownership).

If this hasn’t occurred, you can serve a formal ‘information notice’.   This will oblige the investment firm to provide full details of the lease sale.

They will also be obliged to sell the lease back on the same terms as to how it was bought.