Guides··5 min read
Service Charge vs Ground Rent: What's the Difference? (UK)
Service charge and ground rent are constantly confused. This short UK guide explains what each one is, what it pays for, and how the 2022 ground rent reforms changed the picture.
Service charge vs ground rent: the short answer
They are two completely different things on the same demand.
- A service charge is your share of the cost of running the building — variable, regulated by law, must be reasonable.
- Ground rent is a fixed annual sum paid to the freeholder for the right to occupy the land — historically a small amount, capped at a peppercorn for many new leases since 2022.
If you're staring at a demand that lists both and you're not sure why — this page is for you. For the full deep-dive on service charges, see our pillar guide: Service charges explained.
Side-by-side
| Service charge | Ground rent | |
|---|---|---|
| What it pays for | Running the building (insurance, repairs, cleaning, etc.) | The freeholder's title to the land |
| Variable or fixed? | Variable — based on actual costs | Fixed by the lease (or rising on a fixed schedule) |
| Who sets it? | The landlord/agent/RMC/RTM company, capped by the lease and statute | Set in the lease at grant; cannot be changed unilaterally |
| Held on trust? | Yes — section 42 LTA 1987 | No — it's the freeholder's income |
| Reasonableness test? | Yes — section 19 LTA 1985 | No |
| Can it be challenged? | Yes — First-tier Tribunal under section 27A | Only if the demand is procedurally defective |
| New leases after 30 June 2022 | Unchanged | Capped at a peppercorn (£0) under the Leasehold Reform (Ground Rent) Act 2022 |
What the 2022 reforms changed
The Leasehold Reform (Ground Rent) Act 2022 came into force on 30 June 2022. For most new long leases of houses and flats granted after that date, ground rent is capped at a peppercorn — meaning a legal nominal amount with no actual money payable.
The Act did not apply retrospectively. If your lease was granted before 30 June 2022, your ground rent terms still stand. There has been ongoing political debate about extending the cap to existing leases as part of broader leasehold reform — at the time of writing, that has not happened.
"Doubling" ground rent clauses
A particular problem in leases granted in the 2000s and early 2010s was ground rents that doubled every 10, 15 or 25 years. Over a long lease, these escalated to figures that made flats unmortgageable and, in some cases, technically classed them as assured tenancies — putting leaseholders at risk of losing their home for non-payment.
Most major housebuilders have now offered remediation under voluntary undertakings with the Competition and Markets Authority. If you bought a new-build flat between roughly 2005 and 2017 and have a doubling ground rent, check whether your freeholder is signed up to one of those undertakings.
What about admin charges?
Worth mentioning a third category that often confuses people:
- Admin charge — a one-off fee for a specific landlord service, e.g. consenting to a sublet, providing a leasehold information pack, dealing with a notice of transfer
Admin charges are regulated under Schedule 11 of the Commonhold and Leasehold Reform Act 2002 and must be reasonable. They are not service charges, and they are not ground rent.
Which one can you challenge?
- Service charge — yes, through the procedure described in our pillar guide and our post on whether service charges can go up every year
- Ground rent — generally no, unless the demand is procedurally defective (e.g. not in the prescribed form). The amount is set by the lease and is contractual
- Admin charge — yes, under Schedule 11 — must be reasonable
Where Proppa comes in
If you're in a small block (3–15 flats) where leaseholders have taken over management — through an RMC or Right to Manage — Proppa gives you one place to run the service charge cleanly and transparently. Ground rent (where still payable) goes to the freeholder, not the RTM company — that doesn't change. Book a demo. First month free for founding blocks at launch.
Frequently asked questions
Is ground rent the same as a service charge?
No. Ground rent is a fixed annual payment to the freeholder for the right to occupy the land. A service charge is your share of the variable cost of running the building. They are governed by different legal frameworks and serve completely different purposes.
Do I have to pay ground rent in 2026?
If your lease was granted before 30 June 2022, the original ground rent terms still apply. If your lease was granted after that date and falls within the Leasehold Reform (Ground Rent) Act 2022, ground rent is capped at a peppercorn — effectively zero.
Can ground rent go up?
Only if your lease contains an escalation clause — for example, doubling every 25 years, or RPI-linked increases. The freeholder cannot raise ground rent unilaterally. If your lease has no escalation clause, the ground rent stays as originally set for the whole term.
What happens if I don't pay ground rent?
Where ground rent is more than £350 a year (or £250 outside London) and unpaid for three years, the lease can in principle be at risk of forfeiture under section 167 of the Commonhold and Leasehold Reform Act 2002. In practice, freeholders are required to follow a strict procedure before any forfeiture action. If you're in dispute, get legal advice rather than simply withholding payment.
Can the freeholder charge both ground rent and a service charge?
Yes — they are separate items, governed by separate clauses in the lease, and both are payable if the lease provides for them. They typically appear as separate lines on the same demand.