A proposed exemption from the government’s £250 annual ground rent cap could create uncertainty for property transactions and potentially delay conveyancing, Propertymark has warned.
The government is considering whether so-called “quid pro quo” leases should receive different treatment under reforms due to be included in the Draft Commonhold and Leasehold Reform Bill.
The bill, due to be introduced to Parliament in autumn 2026, is expected to cap ground rents on most existing residential long leases at £250 a year before reducing them to a peppercorn after 40 years.
Quid pro quo leases involve a leaseholder agreeing to pay a higher annual ground rent in exchange for a lower purchase price upfront. According to the consultation, a genuine arrangement would require the reduction in the purchase price to be at least equal to the calculated value of the additional ground rent.
The government is seeking evidence on how common such leases are, whether they should be exempt from the cap and what evidence should be required to demonstrate that a qualifying arrangement exists.
It is also considering how an exemption could operate when a property changes hands, including whether a subsequent buyer would need to have known about the arrangement and benefited from a reduced premium.
Under the proposals being considered, responsibility for proving that a lease qualifies would rest with the freeholder. Possible evidence could include written documentation showing the options originally offered to the leaseholder or a declaration signed when the lease was granted or extended.
No decision has been made on whether an exemption will be introduced. Housing minister Matthew Pennycook told the Housing, Communities and Local Government Committee in March that evidence would need to be extremely compelling to justify one.
Propertymark warned that determining whether a historic purchase price was reduced sufficiently could require specialist valuation evidence and lead to disagreements between freeholders and leaseholders.
It also raised concerns that uncertainty over whether a lease qualified for an exemption could complicate information provided to prospective buyers, affect lending decisions and delay conveyancing.
The trade body said any exemption should be narrowly defined and supported by clear evidence to prevent ordinary ground rents escaping the proposed cap.
Propertymark has also questioned the wider proposal to wait 40 years before capped ground rents are reduced to a peppercorn.
Its July 2026 report Leasehold: still a life sentence? found 86% of leaseholder respondents had paid ground rent during the previous two years, with 47% of those reporting at least a large negative effect on their personal finances.
More than half of leaseholders surveyed said ground rent had a significant negative impact on their ability to sell, while estate agents identified escalating ground rents as one of the three most common barriers to transactions.
Propertymark said it intends to respond to the government consultation on behalf of its members and is seeking views from property professionals with experience of quid pro quo arrangements.
The consultation applies to England and Wales and closes on 27 August.
