Ground Rent Reform and the Leasehold Reform Act: What Managing Agents Need to Know

Ground rent has long been one of the most contentious features of leasehold ownership in England and Wales, and the Leasehold and Freehold Reform Act 2024 represents the most significant legislative intervention in this area for a generation. For managing agents, freeholders and their clients, understanding the direction of travel is essential — not only to remain compliant, but to manage leaseholder expectations as the reforms bed in over the coming years.

Why Ground Rent Became a Political Flashpoint

For decades, ground rent was typically a nominal, often peppercorn, sum. From the mid-2000s onwards, however, a wave of new-build leasehold houses and flats saw developers and investors introduce escalating ground rent clauses — some doubling every 10 or 15 years. Campaign groups such as the National Leasehold Campaign highlighted cases where leaseholders faced ground rents rising into the thousands of pounds, making properties unsellable and unmortgageable.

This pressure led first to the Leasehold Reform (Ground Rent) Act 2022, which restricted ground rent on most new long residential leases to a peppercorn (effectively zero), and subsequently to the far more ambitious Leasehold and Freehold Reform Act 2024, which received Royal Assent in May 2024 and is being implemented in phases by the Ministry of Housing, Communities and Local Government (MHCLG).

What the 2024 Act Actually Changes

Unlike the 2022 Act, which only applied to new leases, the 2024 Act sets out the framework for tackling existing ground rents — a much larger and more legally complex undertaking. Key measures managing agents should be tracking include:

• Enfranchisement and lease extension reform — leaseholders will gain the right to extend their lease by 990 years (up from 90 years for flats and 50 for houses) and ground rent is reduced to a peppercorn on extension.
• Removal of the "two-year rule" — leaseholders will no longer need to have owned their property for two years before qualifying to extend their lease or buy the freehold.
• Reform of premium calculations — the valuation method for lease extensions and freehold purchases is being simplified, generally to the benefit of leaseholders, with marriage value abolished in most cases.
• Ban on new leasehold houses — save for limited exceptions, new houses will need to be sold on a freehold basis.
• Consultation on capping existing ground rents — separately, the government has consulted on options ranging from capping ground rents at a peppercorn to limiting them to a percentage of property value, though this element remains subject to further legislation and is politically contested given its impact on freeholder investment portfolios and pension funds holding ground rent assets.

It's worth noting that many provisions require secondary legislation before coming into force, and implementation is expected to run in stages through 2025 and beyond. Agents should not assume the Act is fully "live" simply because it has passed.

Practical Implications for Managing Agents

Even where clients are freeholders rather than leaseholders, managing agents sit at the sharp end of these reforms because they administer service charge and ground rent demands, handle enfranchisement enquiries, and field leaseholder questions daily. Practical steps include:

• Audit ground rent portfolios now. Agents should work with freeholder clients to identify leases with escalating or doubling ground rent clauses, as these present the highest legal and reputational risk.
• Review Section 21 notices and demand compliance. Ground rent remains legally unenforceable unless demanded correctly under the Landlord and Tenant Act 1987, including provision of a valid notice in the prescribed form. Non-compliant demands are a common and avoidable dispute trigger.
• Prepare for a rise in enfranchisement claims. With the two-year ownership rule being scrapped and premiums potentially falling, agents should expect a surge in lease extension and freehold acquisition notices, and should have processes ready to respond within statutory timescales.
• Communicate proactively with leaseholders. Confusion about what has and hasn't yet come into force is widespread. Agents who provide clear, accurate updates — rather than letting leaseholders rely on forum speculation — build trust and reduce complaint volumes.
• Keep freeholder clients informed of valuation exposure. Freeholders holding ground rent investments should understand the potential impact on asset value, particularly if capping proposals progress.

The Role of RICS, ARMA and First-Tier Tribunals

The Royal Institution of Chartered Surveyors (RICS) and the Association of Residential Managing Agents (ARMA) have both issued guidance urging members to prepare for a period of transitional uncertainty. Disputes over ground rent demands, service charge validity and enfranchisement premiums are typically heard by the First-tier Tribunal (Property Chamber), and agents should ensure documentation — leases, demand notices, service charge accounts — is in good order well before any dispute arises, since tribunal backlogs mean delays are common and thorough preparation speeds resolution considerably.

Using Technology to Stay Ahead of Reform

Given the volume of legislative change, manual tracking of lease terms, ground rent review dates and enfranchisement deadlines is increasingly risky. This is where platforms like WiseBlock add real value — centralising lease data, flagging escalating ground rent clauses, and helping agents generate compliant demand notices and audit trails at scale. As reforms progress in stages, having a single, accurate source of lease and compliance data will be far more efficient than relying on spreadsheets or paper files, particularly for agents managing large, mixed portfolios where risk exposure varies lease by lease.

Looking Ahead

Ground rent reform is not a single event but a rolling process that will continue to unfold through secondary legislation, government consultations and likely further primary legislation targeting existing ground rents directly. Managing agents who take a proactive, well-documented approach now — auditing portfolios, tightening demand compliance and investing in reliable lease management systems — will be far better placed to advise clients confidently and avoid becoming embroiled in avoidable disputes as the leasehold landscape continues its most significant transformation in decades.

For further detail on practical compliance workflows, see related coverage from Arthur Online and MRI Software UK, both of which track leasehold and service charge legislative developments closely.