The Renters’ Rights Act 2025 introduces major reforms to the private rented sector, some of which are particularly relevant to leasehold property owners and anyone buying or selling a leasehold home.
End of “Ground Rent Trap”
Under previous legislation, certain long residential leases could inadvertently be treated as assured shorthold tenancies (ASTs) if the ground rent exceeded £1,000 per year in London or £250 elsewhere. This created significant risk for leaseholders, as non-payment of ground rent could, in extreme cases, lead to mandatory possession proceedings.
The Act removes this anomaly entirely. From 27 December 2025, high ground rents will no longer cause long leases to fall within the AST regime. For leaseholders, this brings welcome certainty and removes a long-standing legal risk that has caused concern for buyers, sellers and mortgage lenders alike.
From a conveyancing perspective, this reform is expected to make affected properties easier to mortgage, sell and remortgage, particularly where older leases contain escalating ground rent clauses.
Leaseholders who rent out their property
While the Act does not abolish ground rent, it strengthens tenant protections and limits how rent can be increased under tenancy agreements.
Leaseholders who let their property will need to ensure their tenancy arrangements comply with the new rules, alongside their obligations under the lease. Tenants will also have greater rights to challenge excessive or artificial rent increases, reducing the risk of disputes during or after a property transaction.
When do the changes take effect?
The Act received Royal Assent on 27 October 2025 and will be introduced in stages, with key tenancy reforms taking effect from 1 May 2026. These include the replacement of fixed-term ASTs with assured periodic tenancies, offering tenants greater long-term security.
Why this matters for conveyancing
For leasehold homeowners, buyers and investors, these changes provide greater clarity, reduced legal risk and improved market confidence.
Understanding how ground rent provisions, lease terms and tenancy arrangements interact is increasingly important when buying, selling or letting a leasehold property.
BWK Solicitors can advise on how these reforms may affect your leasehold transaction and help ensure your property interests are protected.
