MHCLG has launched a consultation into the thorny issue of ‘quid pro quo’ leases, the aim being to attempt to find a solution to the question of whether these leases should be exempt from the proposed £250 cap on ground rents to be introduced in the draft Commonhold and Leasehold Reform Bill (‘the CLRB’).
Quid pro quo literally means ‘something for something,’ and in the context of a lease refers to the deferred element of any payment via the ground rent. There is no legal requirement for a lease to have a ground rent and indeed, following the introduction of the Leasehold Reform Ground Rent Act 2022, new leases cannot have a ground rent (although on an agreed renewal of a flat lease the current ground rent can be maintained until the old lease term would have expired).
However, there are many leases where ground rent remains a feature and that to some extent is the nub of the issue. If a flat owner agreed to take a higher ground rent for a lower premium, then the question arises as to whether that arrangement should be disturbed by the proposed £250 cap on ground rents that the CLRB seeks to introduce.
The basic tenet of the CLRB is that “all ground rent is wrong” because it is “something for nothing”. In many cases, there may be an argument that ground rent adds little. After all, it was the greed of some developers and landlords that led to the current legislation, as they sought to impose ground rents that, in the worst cases, made properties worthless. For example, consider a ground rent that starts at £500 per year and doubles every 10 years. It soon rises to £1,000, then £2,000, and quickly becomes unaffordable. If the lease drafting does not impose a limit, the leaseholder could, within a few years, be paying tens of thousands of pounds annually. This is, of course, an extreme worst-case scenario, and thankfully such cases are rare.
There are, however, other cases where a ground rent plays a part in the balancing of the equation between the landlord and the tenant. Under the Leasehold Reform Act 1967, if the property qualifies for a lease extension, then the new 50-year extension is at a ‘modern ground rent’ – based on proportion of the value relating to the underlying land value. On the grant of the lease in these cases, the leaseholder pays no premium. These arrangements are left undisturbed by the CLRB and rightly so.
Where the consultation seeks answers is in what might be termed the ‘middle ground.’
The question being “is there evidence that some leases have been granted for a reduced premium on the basis of a higher ground rent?”
In my view there are such cases. Often older style higher value properties where, for whatever reason, the ground rent is set by reference to an assessment of site value or market value, or where it is clear that the higher ground rent was a choice on the part of the landlord in accepting a lower premium.
There are probably also lots of examples of deals close to those that might be agreed under statute (similar to the classic lease extension under the 1993 Act) where the landlord may have offered a lower premium and an incentive on costs to be able to keep the ground rent income. Evidence of these may be slightly harder to come by.
And finally, there are probably also lots of examples of cases where the premium is close to that which it might be under the statute, but that the tenant has accepted a ground rent. Those are the deals in which there is less likely to be evidence that there is a quid pro quo element.
However, what I do hope the consultation will show (and indeed government appears to realise from the questions that it is asking) is that the position is not entirely clear-cut and that there are genuine ‘quid pro quo’ leases out there.
To cap the ground rent under these at £250 would be an unexpected windfall and, I suspect in many cases, a gift to those who already own quite valuable property assets. Without some sort of check and balance on this element the legislation will be laid open to a challenge on human rights grounds and so those with expert evidence of these cases should make sure that the government hears about it.
The MHCLG consultation is one for specialists, as it throws up some complex issues:
The consultation is open until 27th August and can be found here: https://www.gov.uk/government/consultations/quid-pro-quo-leases-and-the-ground-rent-cap
Mark Chick is the Joint Head of our expert Landlord & Tenant team.
If you have a query concerning leasehold property, then please contact the experts at Bishop & Sewell’s Landlord & Tenant team by emailing leasehold@bishopandsewell.co.uk or call on 020 7631 4141.
The above is accurate as at 09 July 2026.
The information above may be subject to change. The content of this note should not be considered legal advice and each matter should be considered on a case-by-case basis.
