How do ground rent and service charges affect selling a flat?
Ground rent is a yearly payment to the freeholder under a lease. Service charges cover the costs of running the building, such as insurance, repairs and cleaning. New residential leases granted since 30 June 2022 carry no financial ground rent, but older leases can have rising ground rents that hit value, and high service charges reduce net yield.
Read more in our guide: Selling a problem property
Key leasehold charges
| Charge | What to know |
|---|---|
| Ground rent (new leases) | Peppercorn for most leases granted from 30 June 2022 |
| Doubling ground rent | Can make a flat hard to mortgage |
| Service charge | Must be reasonable; can be challenged at tribunal |
| Major works | Section 20 consultation if any one leaseholder pays over £250 |
| Reserve fund | Built up for future works; usually stays with the flat |
| Sale pack | Management information (often LPE1) from the managing agent |
Ground rent
The Leasehold Reform (Ground Rent) Act 2022 set ground rent to a peppercorn for most new long residential leases. Existing leases are unaffected, and some include rents that double every 10 or 25 years. These onerous clauses can deter lenders and buyers. The government has proposed capping existing ground rents; check the latest position when you sell.
Service charges
Service charges must be reasonable and the costs reasonably incurred. Before major works where any leaseholder will pay more than £250, the landlord must run a section 20 consultation. Leaseholders can challenge charges at the First-tier Tribunal. For an investor, service charges come straight off net yield.
What buyers check
- The management pack: budgets, accounts, arrears, planned works and disputes.
- Any major works or building safety remediation and who pays.
- Ground rent level and review terms.
- Lease length; see lease extensions.
Charges are apportioned to the completion date on the completion statement.
Getting the pack early
Managing agents charge for sale packs and can take weeks to respond. On a portfolio with many leasehold flats, ordering packs as soon as you decide to sell avoids one block holding up the whole sale.
Official Sources and Further Reading
General information for landlords in England, checked against official sources in October 2026. It is not tax, legal or financial advice: speak to a qualified accountant or solicitor about your own circumstances.
Frequently Asked Questions
Ground rent is a yearly payment to the freeholder under a lease. Service charges cover the costs of running the building, such as insurance, repairs and cleaning. New residential leases granted since 30 June 2022 carry no financial ground rent, but older leases can have rising ground rents that hit value, and high service charges reduce net yield.
Yes. Both are allowable expenses for a letting business.
Not separately on a normal assured tenancy; they are a landlord cost covered by the rent.
They usually provide one for a fee. The 2024 leasehold reforms include provisions to cap fees and set time limits.
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