Nationwide is the mortgage lender most nervy about ground rents, suggests survey by National Leasehold Campaign

Nationwide has turned down more mortgages because of concerns over ground rents than any other lender, according to a poll of members organised by the National Leasehold Campaign.

HSBC, Halifax, Nat West, Barclays and Santander are each cited about half as many times: which may be more a reflection of the mortgage market among NLC members than an indication of less concern about ground rents from other lenders.

The NLC says: “This survey shows that leaseholders are also being held hostage by ground rent terms that are causing loss of sales and preventing families from moving on with their lives. We need a decision on existing ground rent terms sooner rather than later.”

---

By Cath Williams

NLC co-founder

Background:

Conservative Housing Secretary Michael Gove raised leaseholder’s hopes in 2023 when he launched a consultation on ground rents offering five potential options to “reform ground rent for people who already pay it” ie retrospective action.

He recognised that ground rent was for no service whatsoever and that for decades leaseholders had been subject to egregious behaviour by many freeholder investors, enabled via cleverly written lease terms.

As a reminder the five options were as follows-

1. Capping ground rents at a peppercorn (effectively zero value)- the campaigners’ favoured opton for obvious reasons.
2. Capping ground rents at an absolute minimum annual value with £250 mooted by some as a “suitable upper threshold”, presumably to avoid the AST trap, which seems to be resolved through the Renters Rights Bill 2025 if that ever comes to fruition.
3. Capping ground rents at a percentage of the property value, with a 0.1% threshold suggested. This is already some mortgage providers’ lending criteria as part of their affordability test. It is interesting to note that lenders had already recognised some ground rents might actually be unaffordable alongside the mortgage repayments.
4. Capping ground rent at the original amount it was when the lease was granted. This was a half hearted attempt to appease freeholders who would undoubtedly cry “it’s a contract!” when faced with options 1, 2 and 3, however they would lose financial benefit from escalating clauses.
5. Freezing ground rent at current levels. This may have appeased freehold investors, further but as Mr Gove stated in his foreword to the consultation, would still leave millions of leaseholders trapped with unsellable properties.

The National Leasehold Campaign rallied the 33,000 members to respond to this consultation by the closing date of 17 January 2024 with only one acceptable option: peppercorn, or zero monetary value.

We then waited with some trepidation for government to decide which option it would select, as we were very aware that the freehold investor sector would also have responded forcibly in an attempt to keep the status quo.

The merry-go-round of politics – the curtailed Leasehold and Freehold Reform Act 2024, the election and a new Labour government – meant the ground rent consultation got buried.

We lobbied the new government to revisit the consultation, most recently by NLC Founder Katie Kendrick at the APPG on leasehold and commonhold reform on 4 March:

Path is set to kill off leasehold and replace it with commonhold

Of course, we also recognise that the 2024 Act contains several clauses to help existing leaseholders to enfranchise – including a maximum 0.1% ground rent to property value calcultaion – but, together with the end to marriage value, this is being challenged by large groups of investors using a judicial review:

Freeholders win right for a judicial review to challenge 2024 Act

So, yet again we wait (im)patiently for the outcome, with the judicial review to be heard in July.

Current Ground Rent Situation

In the meantime we are seeing many NLC posts from beleaguered leaseholders who are losing buyers due to lenders withdrawing mortgage offers once the details of the ground rent in the lease are known.

The precise reason for these loan withdrawals is not always clear.

A quick look at the lenders’ handbook of ukfinance confirms there is no consensus between lenders on acceptable ground rent terms.

This means new buyers are not sure if they can secure a mortgage at all and often spend hundreds of pounds plus a lot of wasted time jumping from one application to another.

In an attempt to find out the real impact of ground rent on mortgage applications we created a short online survey asking respondents to tell us if their or their buyers mortgage applications had been refused and the reason why.

The survey closed on 2 April 2025 and the results indicate that the issue of onerous ground rents is one of the main reasons the majority of lenders are refusing to lend. High service charges run a close second, with cladding and EWS1 also offered as concurrent factors.

Results

(NB the remaining % of respondents not accounted for below did not give a reason for the refusal or indicated they were not told the reason).

24.38% of those surveyed had their first ever mortgage application refused with 51% of that group indicating the reason as “onerous ground rent”. A further 30% of that group indicated the reason as “service charges are too high”.

31% of respondents had tried to remortgage their existing property without success and 47% of these cited onerous ground rent as the reason with 30% of that group indicating service charges as the problem.

62% of respondents had lost the sale of their property due to their buyer being unable to secure a mortgage. The majority of those (63%) were due to the onerous ground rent with service charges also indicated (35% of 62%).

In the free text section of each question we asked respondents to clearly outline what was considered “an onerous ground rent” by the lenders if applicable.

This is where we can see total confusion as a range of explanations are offered from the well publicised doubling clauses (5, 10, 20 and 25 years are quoted), but also to include the following examples; RPI increasing every 5 or 10 years, a £250 increase every ten years, freeholders refusing DOV to alter the increment frequency on ground rent (frequency not stated), LTV affected by ground rent increase devaluing the property below lending threshold, and ground rent premium due to exceed the £250 threshold. This resonates with the lenders’ handbook criteria referred to earlier.

There were many other reasons linked to ground rent offered here but these were vague as though respondents were not informed exactly what the problem was. Not one respondent indicated their ground rent exceeded 0.1% of the property value as a reason for the mortgage refusal which is unexpected as this was mooted as a bench line (Option 3) in the consultation.

Please note there was a large proportion of respondents who did not know the name of the mortgage provider for their buyer.

As Nationwide had the highest count I looked at their lending criteria and found a comprehensive list of ground rent terms they considered “unacceptable”, so many in fact it looks as though they would be much happier with the first consultation option of “Peppercorn”.

This example demonstrates the minefield of potential ground rent terms seen in leases and it is no wonder confusion is rife with some brokers also unable to advise clients effectively (anecdotal evidence in NLC).

Nationwide leasehold mortgage criteria

Lease terms such as ground rent and event fees must be reasonable at all times during the term of the lease and adhere to our requirements below. If you’re unsure as to whether the terms of a lease are unreasonable or onerous, please refer the details to us in plain English for Valuer consideration. If the potentially onerous terms are in relation to the ground rent please include the current ground rent figure per annum, how often it will be reviewed and the price structure it will be reviewed against. See the guidance below.

SECOND HAND PROPERTIES

Unacceptable – advise Issuing Office (Will be declined):

• Unexpired lease term less than 55 years
• Unexpired lease term less than 90 years where we are lending more than 85% of the purchase price/valuation on a second hand flat
• Less than 30 years remaining at the end of the mortgage term
• Ground Rent greater than 0.5% of the property value
• Ground Rent doubles less than every 20 years (e.g. doubles every 5, 10 or 15 years) – acceptable if doubles every 20 years or more
• Ground Rent is compounded RPI
• Ground Rent review period is less than or equal to 5 years

Refer to Issuing Office (Valuer will consider any impact on valuation figure and marketability):

• Unexpired lease term is 55 to 85 years
• Ground Rent greater than 0.1% and less than or equal to 0.5% of the property value
• Ground Rent escalation is linked to any indices greater than RPI
• Ground Rent escalation is linked to the value of the building*
• Ground Rent review period is greater than 5 and less than 10 years
• Event clauses exist for normal use e.g. changing the carpet, installing a TV aerial, etc
• Estate Rent Charges greater than £500 p/a (please provide details of what the charges cover)
• Service Charges greater than 1% of property value p/a (please provide details of what the charges cover)
• Anything that appears onerous, unusual or out of the ordinary

Acceptable (no requirement to advise Issuing Office):

• Unexpired lease term greater than 85 years (Minimum 90 years where we are lending more than 85% of the purchase price/valuation on a second hand flat)
• Ground Rent less than or equal to 0.1% of the property value
• Ground Rent review period greater than or equal to 10 years
• Ground Rent escalation less than or equal to RPI

Conclusion

There is no doubt that sky high service charges, unregulated managing agents and the ongoing Building Safety issues need to be high on housing minister Matthew Pennycook’s agenda as these are having a devastating effect upon not just the housing market but more importantly upon leaseholders’ well-being and mental health.

This survey shows that leaseholders are also being held hostage by ground rent terms that are causing loss of sales and preventing families from moving on with their lives. We need a decision on retrospective action for ground rent terms sooner rather than later, and if we are waiting for the judicial review outcome before this can happen then the minister needs to tell us that that is the case.

A 0.1% cap on all retrospective ground rents whether enfranchising or not will no doubt relieve the financial burden upon hundreds if not thousands of existing leaseholders depending, of course, on the current market value of their property. It might not increase the number of sales if there are other contributory factors, but it would relieve the burden on leaseholders while they fight against unreasonable service charges and building safety issues.

OR the Minister could just be bold and choose Michael Gove’s option 1- Peppercorn, which would undoubtedly lead to a second judicial review but cease the ridiculous feudal practice of hard working people handing part of their earnings over to a faceless, sometimes offshore investor simply because they demand it.