Open consultation

Quid pro quo leases and the ground rent cap

Published 2 July 2026

Applies to England and Wales

Introduction

The government is legislating to cap ground rents at £250 year, changing to a peppercorn after 40 years. 

In the policy paper on addressing unregulated and unaffordable ground rent and Annex 5 to the draft Impact Assessment for the draft Commonhold and Leasehold Reform Bill (CLRB), we indicated that we are considering a narrow exemption to this policy for ‘quid pro quo’ leases – where a higher ground rent is agreed between the leaseholder and freeholder for a corresponding reduction in premium. 

The ground rent cap, along with the provisions in the draft CLRB, has undergone pre-legislative scrutiny by the Housing, Communities and Local Government Committee. 

This consultation seeks further technical feedback on whether there should be an exemption and, if so, how it should be defined and how it should work.  

Geographical scope

These proposals relate to England and Wales.   

Body responsible for the consultation

The Ministry of Housing, Communities and Local Government (MHCLG).  

Duration 

This consultation will run for 8 weeks and will close at 11:59pm on 27 August 2026.   

Enquiries

For any enquiries about the consultation please contact: quidproquoleasesconsultation@communities.gov.uk 

How to respond  

You can respond by completing the online survey.

Alternatively, you can email your response to the questions in this consultation to: quidproquoleasesconsultation@communities.gov.uk

This consultation is aimed at leaseholders and freeholders with first-hand experience of this specific type of lease, and professionals working in this sector. 

Glossary 

Term	Description
The Leasehold and Freehold Reform Act 2024 (the LFRA)	Primary legislation which reforms the leasehold system
The Leasehold Reform (Ground Rent) Act 2022 (the GRA)	Primary legislation which regulates ground rent in new residential leases from its date of implementation
The Leasehold Reform Act 1967 (the 1967 Act)	Primary legislation which regulates lease extensions of houses
The Leasehold Reform, Housing and Urban Development Act 1993 (the 1993 Act)	Primary legislation which regulates lease extensions of houses
The Commonhold and Leasehold Reform Bill (the Bill)	Primary legislation to be introduced in Parliament
Enfranchisement	The practice of purchasing a freehold or extending a lease
Freeholder	In this consultation, we generally use the term “freeholder” to mean the party who granted the lease, a landlord or an intermediate landlord. There may be several layers of landlords. For example, the freeholder (who owns the building and land forever) may grant a lease of the whole building to a leaseholder who may then grant further subleases of the individual flats and would be the intermediate landlord for the subleases.
Premium	The price paid upfront when buying or extending a lease
Standard Valuation Method (SVM)	Valuation method set out in the LFRA which provides for how premium valuation calculations for enfranchisement and lease extensions under the 1967 Act and the 1993 Act are to be carried out
Successor	The person to whom a lease is sold onto after the first grant of the lease

Background

The government is legislating to cap ground rent at £250 per year, changing to a peppercorn after 40 years. This will apply to residential long leases granted before the commencement of the Leasehold Reform (Ground Rent) Act 2022 (GRA) (subject to limited exceptions including business leases, community-led housing and certain financial products). This policy was announced in January 2026 and will be included in the Commonhold and Leasehold Reform Bill (the Bill), which was announced in the King’s Speech on 13 May 2026. The measures in the Bill, including the cap on ground rent, have been published in draft form and have undergone pre-legislative scrutiny by the Housing, Communities and Local Government Committee.   

In introducing the cap, the government’s objectives are to: 

• address unregulated and unaffordable ground rents  
• end the anachronism of ground rents and the current 2-tier ground rent system

Ground rents are an annual or periodic charge that leaseholders are obliged to pay to freeholders under the terms of their lease. Unlike a service charge, there is no requirement to provide a service in return for this payment. They are a feature of an outdated and feudal leasehold system. When implemented, the ground rent cap will immediately address affordability issues that leaseholders face. It will also simplify the process of buying and selling leasehold properties. The subsequent change to a peppercorn cap will effectively end the vast majority of residential ground rents. These reforms will deliver a modernised, more efficient property market. 

As set out in in our policy paper, the government is considering whether the Bill should include an exemption for leases where a higher ground rent is specifically negotiated in return for at least an equivalent discount on the premium. These negotiated leases are known as quid pro quo leases. If a leaseholder and freeholder have specifically agreed a higher ground rent in return for a lower premium, the ground rent acts as a form of payment for the lease in return for this reduced premium, rather than as an additional payment. Quid pro quo arrangements can be agreed when a lease is originally granted or when an extension is granted. In cases like this, a cap on ground rents could be considered to be unjustified. This consultation seeks further views from specialists and those with experiences of these leases. 

Some stakeholders have argued that ground rents generally function in this way, as part of the payment for the lease, with a corresponding discount on the premium. To date, the government has not seen convincing evidence of this. In the vast majority of cases, leaseholders are not given a clear choice about whether to pay ground rent or how much it should be. We are not considering a broad exemption from the cap, but one that applies only where there is a specific, clear agreement by the parties for a higher ground rent in exchange for a corresponding lower premium. It is vital that any exemption for quid quo pro leases does not undermine the policy objectives of the ground rent cap.  

This consultation explores the prevalence of genuine quid pro quo leases which have been fairly negotiated between the parties, and considers how these might be treated under the ground rent cap. Section 1 sets out the overall considerations relating to quid pro quo leases. Section 2 asks how they should be defined, and section 3 considers how to make a definition work in practice, including questions relating to enforcing an exemption and ensuring it is properly understood and used. Section 4 considers how exempt ground rents should be treated. Section 5 considers the position of successors in title. Finally, section 6 asks specific questions to be answered by leaseholders and freeholders who have agreed on quid pro quo arrangements to understand the prevalence and uses of such leases.  

We will use the information provided through this consultation to determine whether any exemption for such leases is needed and, if so, how it should operate. This consultation is concerned with the definition and operation of a possible exemption in limited circumstances. In considering this issue the government is mindful of the recommendation of the Housing Communities and Local Government Committee who in their pre-legislative scrutiny recommendations argued that a small number of exemptions should not slow delivery of the cap on ground rents.  The government will respond to the Committee’s recommendations in due course.

Overall consideration of quid pro quo leases

This section sets out considerations relating to whether it is appropriate to exempt quid pro quo leases from the ground rent cap.

Where an agreement has been explicitly reached between 2 parties to pay higher ground rent than would otherwise be payable in exchange for at least a corresponding reduction in the premium, it could be seen as unfair for the government to subsequently restrict the amount of the ground rent payable. This is because the parties have specifically agreed the arrangements and the leaseholder is getting something in return for the higher ground rent they have agreed to pay.

However, in considering the case for an exemption we are conscious that we need to ensure that any exemption does not undermine the purpose and benefits of the ground rent cap.    

Alongside reforming ground rents to ensure they are reasonable, affordable and proportionate, the government is committed to ending the feudal leasehold system, including the anachronism of ground rents and the current 2-tier ground rent system (where new leases are subject to a peppercorn ground rent but older leases granted before the commencement of the GRA are not).^{[footnote 1]} 

Any system which allows high ground rents to continue risks undermining the first objective of the reforms. In addition, a system which allows 2 tiers of ground rents is necessarily more complex, which could hamper the benefit of the reforms to the property market.  However, without an exemption, freeholders may unfairly lose out on payment previously agreed with the leaseholder in return for their occupation of the property. 

If the government decides to create a narrow exemption for quid pro quo leases, it must work as intended, protecting legitimate agreements rather than functioning as a loophole allowing unscrupulous actors to circumvent the cap. The government is conscious there may be an inequality of resources between leaseholders and freeholders and the potential for abuse in this area.   

The government is also conscious that any exemption risks creating uncertainty for both leaseholders and freeholders, while also adding complexity and additional costs in determining whether leases are quid pro quo leases. We will need to consider whether the benefits of an exemption outweigh these negative impacts.

Question 1

In principle, do you think quid pro quo leases should be exempt from the ground rent cap?

• yes
• no
• don’t know

Defining a quid pro quo lease

This section explores how we might define quid pro quo leases for the purposes of any exemption from the ground rent cap.  

The Leasehold and Freehold Reform Act 2024 (the LFRA) includes provisions (not yet in force) to make it easier and cheaper for leaseholders to enfranchise. An element of the new approach is that the amount of the ground rent assessed for the purpose of the enfranchisement calculation is limited to 0.1% of the value of the property. The exemption in paragraph 26(9) of Schedule 4 is as follows:^{[footnote 2]} 

(b) the current lease was granted on the basis that— 

(i) the premium was lower, and the rent was higher, than each would otherwise have been, and 

(ii) the value of paying the lower premium was (at the time of the grant) broadly equivalent to, or greater than, the capitalised value of the extra rent. 

The LFRA also provides at paragraph 26(10) of Schedule 4 that the definition only applies where it is shown to be applicable i.e. the freeholder can show that the lease was specifically agreed to be at a higher ground rent in order to compensate for a corresponding reduction to the premium. 

The government considers that the definition in the LFRA is a helpful starting point for defining quid pro quo leases for the purposes of any exemption to the ground rent cap. 

Question 2

Do you agree with the definition of quid pro quo leases as set out in the LFRA for the purposes of a ground rent cap? 

• yes
• no
• don’t know

Question 3

Do you agree that the leaseholder must receive a discount on the premium that is at least equivalent to the higher ground rent?

• yes
• no
• don’t know

Question 4

Do you agree that the onus should be on the freeholder to prove that a lease is a quid pro quo lease?

• yes
• no
• don’t know

Question 5

Please use this box to expand on your answers above.

Free text.

Making a definition work in practice

This section sets out considerations for how we can make any definition work in practice for freeholders and leaseholders, mitigating the risk of disputes.  

The LFRA definition was designed to be used in the enfranchisement process, where both parties have access to professional advice at the time of the transaction and a valuation of the property is undertaken. Under the enfranchisement process of the LFRA, the leaseholder and freeholder would most likely receive advice from professionals about the terms of the lease and application of the law. Both parties could also ultimately seek a determination from the appropriate tribunal (the First-tier Tribunal in England and Leasehold Valuation Tribunal in Wales) on these elements.  

This is different from the ground rent cap which will apply to all 3.8 million leasehold properties in England and Wales from the date on which the legislation comes into force, and will not require the parties to access professional advice or a valuation.  

Using the LFRA definition for the general ground rent cap, in a different context to the enfranchisement scheme and without expert valuation advice, could cause confusion over whether a lease is in fact a quid pro quo lease, and prompt disagreements and disputes. It could also give rise to misuse of the ground rent cap measure, and lead to leaseholders being uncertain about whether their lease is likely to be a quid pro quo lease and therefore whether or not their ground rent is subject to the cap.  

A leaseholder and freeholder might disagree about whether the ground rent was actually agreed in return for at least an equivalent lower premium. For example, a leaseholder may claim the discount in premium was not commensurate to the ground rent, or that they did not have sufficient information at the time to meaningfully agree to this. As set out our policy statement published in January 2026, many leaseholders had no effective choice about whether to pay a given ground rent or not. They often found out about the ground rent and its implications late in the process of purchasing, once they had invested significant time and effort in investigating the purchase of a property.  

At worst, an unscrupulous freeholder could incorrectly claim that a lease is quid pro quo (and therefore the ground rent cap does not apply), in the hope that the leaseholder will not challenge this assertion. For example, if a non-statutory lease extension had taken place, a freeholder could claim that the ground rent negotiation was done on a quid pro quo basis.  

For the ground rent cap, using the LFRA definition in isolation is unlikely to meet the government’s aims and risks unrepresented leaseholders being placed at a disadvantage. This would risk undermining the efficacy of the measure overall.  

The government is therefore considering how to ensure that any definition of quid pro quo leases for the purpose of the ground rent cap works in practice for both leaseholders and freeholders. We consider it would be appropriate that, if an exemption for this type of lease is provided in the legislation, additional requirements should be set out on the face of the legislation to reduce the level of uncertainty faced by leaseholders and freeholders alike.    

Leases which should not be considered to be quid pro quo leases  

There are certain leases which we do not consider to be examples of a quid pro quo lease. These are described below: 

A leaseholder simply purchases a property with a high ground rent

Some parties have suggested that the presence of a high ground rent alone is sufficient to demonstrate the existence of a quid pro quo lease. We do not agree with this position. We have not seen any compelling evidence that leaseholders routinely pay lower premiums for properties with higher ground rents. We consider that a quid pro quo lease exists where there is clear evidence of a leaseholder choosing between a higher and lower ground rent for the same property, in return for at least an equivalent reduction in the premium.  

A leaseholder has undertaken a non-statutory lease extension and chosen to continue paying the ground rent which they were paying before the extension

Prior to the GRA coming into force, leaseholders and freeholders could agree different terms for a non-statutory lease extension including ‘high’ rent for a lower premium. Since the GRA, this has been restricted so that the extended term must be at a peppercorn rent – and the original term is limited to the ground rent under the previous lease (i.e. the ground rent cannot increase as a result of the lease extension). Leaseholders agreeing to continue to pay the original ground rent in the lease have essentially made a choice not to pay off their ground rent obligation. We do not believe that this should be considered to be a quid pro quo lease, as the leaseholder is simply making a choice to continue with the terms of the original lease and the cap should apply (just as it would to the original lease).

A leaseholder is living in a certain type of property

The definition of quid pro quo leases as set out in the LFRA does not include provision relating to property type, as this was addressed by other provisions in the LFRA. Noting this, we do not consider it appropriate to allow a claim that a lease is quid pro quo under the ground rent cap simply because of property type.  

Question 6

Do you agree that the leases described above should not meet the definition of quid pro quo leases for the purpose of any exemption?

• yes
• no
• don’t know

Please use this box to expand on your answers above.

Free text.

Commensurate value  

Commensurate value

The definition in the LFRA already requires that the additional ground rent paid should be commensurate with a reduction in the premium. We consider that this aspect of the definition is sufficient for the purposes of a quid pro quo lease. We propose that this value should be calculated by comparing the capitalised value of ground rents with the reduction in premium using the Standard Valuation Method (SVM) set out in the LFRA.^{[footnote 3]}

While we recognise that capitalisation rates used in individual cases can vary, we consider it important to avoid debates about the appropriate capitalisation rate and therefore propose to use the rates prescribed in regulations to be made under the LFRA.^{[footnote 4]} 

The reformed valuation regime in the LFRA will come into force after rectifying in primary legislation a small number of specific but serious flaws that would prevent certain provisions from operating as intended. These fixes will be included in the Bill.   

Question 7

Do you agree that commensurate value should be calculated according to the LFRA methodology and according to the standard capitalisation rates?

• yes
• no 
• don’t know

Please use this box to expand on your answer above.

Free text.

Evidence required to demonstrate a quid pro quo lease  

We consider that for a lease to be considered a quid pro quo lease, a freeholder must demonstrate that the leaseholder had a real choice between different amounts of ground rent for the property under consideration. However, any requirements around evidence must be simple and reasonable, to ensure legitimate agreements can be demonstrated. 

The Bill could include a requirement for the freeholder to provide evidence that the quid pro quo lease agreement was specified in writing before or at the time of the grant or extension of the lease, for example. Alternatively, the legislation could require both parties to sign a declaration that they agreed to the arrangement before or at the time of the grant or extension. The appropriate tribunal should be available to leaseholders who wish to challenge the existence of a quid pro quo lease based on the information provided. 

Given the complexities, we consider that third party involvement is necessary to scrutinise the terms of the lease and the circumstances in which quid pro quo arrangements may have been agreed, so as to give a definitive view as to whether the lease meets the quid pro quo definition. Even if a freeholder provides evidence purporting to demonstrate that the lease meets the definition, the government does not consider it reasonable to place the onus solely on the leaseholder to interrogate this. Evidence from, for example, the Competition and Markets Authority and the Homeowners Alliance, shows that information gaps exist in the leasehold system, particularly around costs. In other words, leaseholders may not fully understand the complex issues involved. In those circumstances, a specialist, independent third party will have the necessary expertise and lack of interest to determine whether a lease meets the definition.

There are a number of bodies that could be responsible for assessing such leases. We could require the freeholder to make an application to the appropriate tribunal for a declaration that a lease meets the definition of a quid pro quo lease. However, requiring all cases to go to the appropriate tribunal could be overly burdensome for the HM Courts & Tribunal Service (HMCTS), as well as the parties themselves. Alternatively, an accredited body may be able to determine that the lease meets the definition. The government could also require the lease to be registered before it can be considered quid pro quo. We are seeking views on alternative parties or processes that could ensure that such leases are scrutinised by a specialist, independent party, without placing unnecessary strain on the appropriate tribunal.

In addition to third party scrutiny, demands for prohibited ground rent will be enforced via Trading Standards,7 as now. They may impose a financial penalty of between £500 and £30,000 under the GRA if they are satisfied that a freeholder has demanded, or failed to repay, a prohibited rent. Freeholders will also be prohibited from knowingly providing false information in an attempt to demonstrate the existence of a quid pro quo lease. 

Question 8

Do you have views on what evidence should be required to demonstrate that a lease meets the definition of a quid pro quo lease?

Free text.

Question 9

Do you agree that freeholders should be required to demonstrate that leaseholders had a meaningful choice about the amount of ground rent payable for a particular property? 

• yes
• no
• don’t know

Please use this box to expand on your answers above.

Free text. 

Question 10

In what circumstances, if any, would a quid pro quo lease exist without evidence of negotiation or choice?

Free text.

Question 11

Do you believe it is necessary for a specialist, independent third party to determine whether a lease was granted on a quid pro quo basis? 

• yes
• no
• don’t know

Please use this box to expand on your answers above (optional).

Free text.

Question 12

(If you answered yes to question 11) Do you have views on which bodies or individuals would be suitable for this? 

Free text. 

Question 13

(If you answered no to question 11) Do you have views on how best to identify whether a lease is a quid pro quo lease?

Free text. 

Question 14

Do you have other views on how to prevent misuse of the proposed exemption?

Free text.

Treatment of exempt quid pro quo leases

The ground rent cap is not intended to be an intervention in the price paid for a leasehold property itself, noting that in a genuine quid pro quo lease the ground rent has been negotiated as part of the purchase price. It could therefore be seen as disproportionate to cap the rent at £250 if the lease is exempt. However, we are also conscious that if quid pro quo leases contain terms that have been shown to cause consumer harm, allowing them to continue would undermine the objectives of the ground rent cap. 

Treatment of quid pro quo leases under the £250 cap  

If a lease satisfies the definition of a quid pro quo lease, then at least part of the higher ground rent being paid is reflected in a reduced premium and arguably should not be capped. However, it does not necessarily follow that all the ground rent paid is consideration for a reduced premium. For instance, on a lease extension a leaseholder might agree to an increased ground rent in return for a lower premium, while the original ground rent was already in excess of the cap.

Example

A leaseholder and freeholder agree a lease extension, using the non-statutory route. Current ground rent is £500 per year. The total cost to extend the lease is offered as either £10,000 upfront (continuing the ground rent at £500 per year), or alternatively £5,000 upfront (with ground rent at £1,500 for 5 years and then falling to the original £500).

In the example above it could be argued that the £1,000 additional ground rent is a genuine quid pro quo payment while the continuing original ground rent of £500 is not.  

On balance we do not consider that the additional complexity and confusion which would result from trying to distinguish between the quid pro quo and non-quid pro quo elements of leases are likely to be justified. While this will arguably slightly benefit freeholders at the expense of leaseholders, this effect would be counteracted by our proposed treatment of quid pro quo leases under a peppercorn cap (see next section).  

Treatment of quid pro quo leases under peppercorn cap  

Given the government’s objective to ultimately end the anachronism of financial ground rents, we do not consider it desirable for leaseholders or the property market in general to allow quid pro quo leases to continue indefinitely.  A property market in which quid pro quo leases continue to be sold both for a premium and with a financial ground rent obligation will continue the current complexity and the problems associated with a 2-tier market. This consideration does not apply in the same way to the other exemptions from the ground rent cap which concern legitimate commercial practices which will continue unaffected by these reforms and which in many cases will naturally be terminated before a property is sold (e.g. home finance plan leases) – see below for further on this. 

Therefore, our starting point is that exempt ground rents in quid pro quo leases are capped at a peppercorn after 40 years (starting from the implementation date of the measures), at the same time as non-exempt ground rents.  This will result in value being transferred from freeholders to leaseholders in the case of some leases, the amount of which will be dependent on the length of the lease and the amount of the ground rent. We consider that a 40-year period before the implementation of the peppercorn cap to quid pro quo leases is a proportionate intervention and sufficient time in the majority of cases for freeholders to recoup any forgone premium. Given that these leases will have been exempt from the £250 cap for the previous 40-year period, it would not be fair to set a longer time period before they are capped at a peppercorn. However, we welcome views on this and will consider any evidence submitted as part of consultation responses. 

This proposal would essentially mean that for ground rents which do not increase over time, the value transfer of a quid pro quo lease will be the same in percentage terms as a lease which is under the £250 cap.  

We have considered whether any other exemptions from the ground rent cap in the GRA should also be subject to a peppercorn cap after 40 years. Our assessment is that such a measure would not be appropriate. Further detail on the individual exemptions is set out below.

Business leases

Business leases are exempt from the GRA as it is considered appropriate to allow ground rent that is more than a peppercorn where e.g. a flat above a pub is lived in by the publican and the use of the dwelling significantly contributes to the business purpose because the publican is required to open the pub at certain times. We do not think the financial ground rent in such a case should be changed to a peppercorn cap.  

Community housing leases

Community-led housing is exempt from the GRA. This is due to the special nature of these arrangements where modest ground rent is used to fund the growth and community functions associated with this housing type. This is a limited exception for specific forms of housing which both have a social object and have local democratic control. Given the nature of this housing and the impact on the organisations operating such housing, we do not think that a change to a peppercorn cap would be appropriate.

Home finance plan leases 

The GRA explicitly excludes home finance plan leases from the ground rent cap. If we were to cap ground rents under these arrangements, it would undermine their effectiveness and effectively prohibit future home finance plans (in particular specialised products such as Islamic mortgages or equity release schemes). The government does not wish to undermine these arrangements and therefore a peppercorn cap would not be appropriate.  

Lease extensions of houses

The GRA already exempts statutory lease extensions under the Leasehold Reform Act 1967 (the 1967 Act) and the Leasehold Reform, Housing and Urban Development Act 1993 (the 1993 Act). The 1967 Act provides leaseholders in houses with a statutory right to extend their leases for 50 years for no premium. In return they pay a higher ground rent for this extended 50-year term. Since the payment for this lease extension is composed entirely of the agreed higher ground rent, ending such arrangements before the end of the 50-year term would deprive freeholders of any compensation in return for the lease extension. Once the LFRA measures have been commenced, lease extensions for houses will be at a peppercorn ground rent upon a payment of a premium, so no new ground rents under this provision will be created. For flats, the 1993 Act already requires a lease extension at a peppercorn ground rent, upon payment of a premium.  

Shared ownership 

Under the GRA, only the rent due on the leaseholder’s share of a shared ownership property is subject to the ground rent cap. The landlord is permitted to charge rent in respect of their share which is not subject to the cap. It is not appropriate to undermine the shared ownership model by imposing a peppercorn cap on the rent payable in respect of the landlord’s share. 

Leases granted for no premium 

These leases are exempt from the GRA since the ground rent represents the full payment made for the property. In effect these operate as long term rental contracts in which people make a regular payment for the property. We do not intend to interfere with these arrangements and do not consider a peppercorn cap after 40 years would be appropriate.

Question 15

Do you agree that all the ground rent in quid pro quo leases should be exempt from the £250 cap?

• yes
• no
• don’t know

Question 16

Do you agree that the ground rent in quid pro quo leases should not be exempt from the peppercorn cap after 40 years?

Question 17

Do you agree that the other exemptions to cap on ground rents should continue beyond 40 years?

• yes
• no 
• don’t know

Question 18

Please use this box to expand on your answers to questions 15 to 17 above (optional).

Free text.

Successors in title

We are considering how to treat quid pro quo leases that have been sold by the original leaseholder (who negotiated the quid pro quo arrangements) to a successor in title. The original leaseholder who was party to the negotiations may have benefitted from a lower premium, in exchange for paying a higher ground rent. However, where a new leaseholder purchases a property after the lease was first granted, they would not have been involved in the negotiations where it was agreed that a higher ground rent should be paid in exchange for a corresponding discount on the premium. This arrangement may not have been communicated in the sale and a choice as to the amount of the ground rent may not have been offered to the new leaseholder. It may therefore be seen as unfair from the new leaseholder’s perspective that their ground rent should be exempt from the cap.  

Equally, a freeholder may consider the new leaseholder as a successor of the lease in relation to all its terms, including the quid pro quo arrangements. It may be seen as unfair from their perspective that the higher ground rent they had negotiated should now be reduced (noting that they received a reduced premium in exchange), simply because the original leaseholder has sold their property. 

One approach would be to limit where quid pro quo arrangements apply to a successor in title to cases where the freeholder can demonstrate that the new leaseholder was aware of the arrangement and benefited from it in terms of a reduced premium. 

There may be a case for different treatment of successors in title before and after the implementation of a ground rent cap. In particular we are conscious that if successors in title are not bound by the cap, then this could create a potentially perverse incentive for leaseholders to sell their current property in order to eliminate the quid pro quo obligation. In addition, given the rules on quid pro quo leases will be set out by government for future sales, it will be easier to ensure future purchasers have clarity about their obligations when purchasing a property with a quid pro quo lease.   

Question 19

Do you think successors who purchased a property before the enactment of the ground rent cap should be within the scope of any exemption for quid pro quo leases? 

• yes
• no
• don’t know

Question 20

Do you think successors who purchased a property after the enactment of the ground rent cap should be within the scope of any exemption for quid pro quo leases?

• yes
• no
• don’t know

Question 21

Do you think that freeholders should be required to demonstrate that a successor in title was (a) aware of a quid pro quo lease arrangement and (b) benefited in terms of a reduced premium?

• yes
• no
• don’t know

Question 22

Please use this box to expand on your answers to questions 19 to 21 above.

Free text.

Prevalence and uses of quid pro quo leases

This section of the consultation is aimed at leaseholders and freeholders who have themselves bought or sold a quid pro quo lease, or negotiated a lease extension on a quid pro quo basis. The government is seeking further evidence on the prevalence of such leases and the circumstances in which they are used.    

Please do not answer this section if you do not believe you have yourself bought or sold a lease of this description, or negotiated a lease extension on this basis. 

Question 23 

Have you bought or sold a lease on a quid pro quo basis?

Question 24

Are you responding as a:

• freeholder
• leaseholder

Freeholder questions

Question 25

How many leases of this description do you own the freehold of? 

Free text. 

Question 26

For what purpose do you most commonly agree to reduce the premium for a corresponding uplift in ground rent?

Question 27

Please give an example of a typical lease arrangement that you hold that you consider to be a quid pro quo lease as described above, including the premium and ground rent, and the length of the lease.

Free text.

Question 28

Was the arrangement of a higher rent and corresponding lower premium explicitly agreed in writing by the leaseholder at the point of sale or extension?

Free text. 

Question 29

What documents do you hold relating to the arrangement?

Free text. 

Leaseholder questions

Question 30 

Were you extending a lease or buying the property on a quid pro quo basis?

• extending a lease 
• buying the property

Question 31

In what year did you purchase your leasehold property? 

Free text. 

Quesiton 32

What premium did you pay at the date of purchase or extenstion?

Free text. 

Question 33

If known, how much of a discount was this from the market price?

Free text.

Question 34

At the point of sale or extension, how much did you agree as your ground rent?

Please include whether the ground rent was fixed or variable, and if applicable, the increase mechanism

Free text. 

Question 35

At the point of sale or extension, how many years was remaining on your lease?

Free text. 

Question 36

For what purpose did you agree to a higher ground rent and equivalent lower premium?

Free text.

Quesiton 37

What documents do you hold relating to the arrangement?

Free text. 

Question 38

Do you have any further views on defining or implementing an exemption from the ground rent cap for quid pro quo leases?

Free text.

About this consultation

This consultation document and consultation process have been planned to adhere to the Consultation Principles issued by the Cabinet Office.

Representative groups are asked to give a summary of the people and organisations they represent, and where relevant who else they have consulted in reaching their conclusions when they respond.

Information provided in response to this consultation may be published or disclosed in accordance with the access to information regimes (these are primarily the Freedom of Information Act 2000 (FOIA), the Environmental Information Regulations 2004 and UK data protection legislation.  In certain circumstances this may therefore include personal data when required by law.

If you want the information that you provide to be treated as confidential, please be aware that, as a public authority, the department is bound by the information access regimes and may therefore be obliged to disclose all or some of the information you provide. In view of this it would be helpful if you could explain to us why you regard the information you have provided as confidential. If we receive a request for disclosure of the information we will take full account of your explanation, but we cannot give an assurance that confidentiality can be maintained in all circumstances. An automatic confidentiality disclaimer generated by your IT system will not, of itself, be regarded as binding on the Department.

The Ministry of Housing, Communities and Local Government will at all times process your personal data in accordance with UK data protection legislation and in the majority of circumstances this will mean that your personal data will not be disclosed to third parties. A full privacy notice is included below.

Individual responses will not be acknowledged unless specifically requested.

Your opinions are valuable to us. Thank you for taking the time to read this document and respond.

Are you satisfied that this consultation has followed the Consultation Principles?  If not or you have any other observations about how we can improve the process please contact us via the complaints procedure.

Personal data

The following is to explain your rights and give you the information you are entitled to under UK data protection legislation.

Note that this section only refers to personal data (your name, contact details and any other information that relates to you or another identified or identifiable individual personally) not the content otherwise of your response to the consultation.

1. The identity of the data controller and contact details of our Data Protection Officer    

The Ministry of Housing, Communities and Local Government (MHCLG) is the data controller. The Data Protection Officer can be contacted at dataprotection@communities.gov.uk or by writing to the following address:

Data Protection Officer,
Ministry of Housing, Communities and Local Government,
Fry Building,
2 Marsham Street,
London
SW1P 4DF

2. Why we are collecting your personal data  

Your personal data is being collected as an essential part of the consultation process, so that we can contact you regarding your response and for statistical purposes. We may also use it to contact you about related matters.

We will collect your IP address if you complete a consultation online. We may use this to ensure that each person only completes a survey once. We will not use this data for any other purpose.

Sensitive types of personal data

Please do not share special category personal data or criminal offence data  if we have not asked for this unless absolutely necessary for the purposes of your consultation response. By ‘special category personal data’, we mean information about a living individual’s:

• race
• ethnic origin
• political opinions
• religious or philosophical beliefs
• trade union membership
• genetics
• biometrics 
• health (including disability-related information)
• sex life
• sexual orientation

By ‘criminal offence data’, we mean information relating to a living individual’s criminal convictions or offences or related security measures.

3. Our legal basis for processing your personal data

The collection of your personal data is lawful under article 6(1)(e) of the UK General Data Protection Regulation as it is necessary for the performance by MHCLG of a task in the public interest/in the exercise of official authority vested in the data controller.  Section 8(d) of the Data Protection Act 2018 states that this will include processing of personal data that is necessary for the exercise of a function of the Crown, a Minister of the Crown or a government department i.e. in this case a consultation.

Where necessary for the purposes of this consultation, our lawful basis for the processing of any special category personal data or ‘criminal offence’ data (terms explained under ‘Sensitive Types of Data’) which you submit in response to this consultation is as follows. The relevant lawful basis for the processing of special category personal data is Article 9(2)(g) UK GDPR (‘substantial public interest’), and Schedule 1 paragraph 6 of the Data Protection Act 2018 (‘statutory etc and government purposes’). The relevant lawful basis in relation to personal data relating to criminal convictions and offences data is likewise provided by Schedule 1 paragraph 6 of the Data Protection Act 2018.

4. With whom we will be sharing your personal data

As this is a joint consultation between the Ministry of Housing, Communities and Local Government (MHCLG), HM Treasury (HMT) and HM Revenue and Customs (HMRC) Valuation Office, MHCLG will share consultation responses with HMT and HMRC to support the delivery of inter-government business.

MHCLG may appoint a ‘data processor’, acting on behalf of the Department and under our instruction, to help analyse the responses to this consultation.  Where we do we will ensure that the processing of your personal data remains in strict accordance with the requirements of the data protection legislation.

5. For how long we will keep your personal data, or criteria used to determine the retention period

Your personal data will be held for 2 years from the closure of the consultation, unless we identify that its continued retention is unnecessary before that point.

6. Your rights, e.g. access, rectification, restriction, objection

The data we are collecting is your personal data, and you have considerable say over what happens to it. You have the right:

a. to see what data we have about you

b. to ask us to stop using your data, but keep it on record

c. to ask to have your data corrected if it is incorrect or incomplete

d. to object to our use of your personal data in certain circumstances

e. to lodge a complaint with the independent Information Commissioner (ICO) if you think we are not handling your data fairly or in accordance with the law.  You can contact the ICO at https://ico.org.uk/, or telephone 0303 123 1113.

Please contact us at the following address if you wish to exercise the rights listed above, except the right to lodge a complaint with the ICO: dataprotection@communities.gov.uk or

Knowledge and Information Access Team,
Ministry of Housing, Communities and Local Government,
Fry Building,
2 Marsham Street,
London
SW1P 4DF

7. Your personal data will not be sent overseas

8. Your personal data will not be used for any automated decision making

9. Your personal data will be stored in a secure government IT system

We use a third-party system, Citizen Space, to collect consultation responses. In the first instance your personal data will be stored on their secure UK-based server. Your personal data will be transferred to our secure government IT system as soon as possible, and it will be stored there for 2 years before it is deleted.

1. Except in the case of pre-commencement leases where they are extended under the non-statutory route. In such cases, section 6 of the GRA requires a peppercorn rent to be payable for the new term of a non-statutory lease extension, whilst the rent on the existing term is capped at the rent that would have been payable under the pre-commencement lease. ↩

2. Except in the case of pre-commencement leases where they are extended under the non-statutory route. In such cases, section 6 of the GRA requires a peppercorn rent to be payable for the new term of a non-statutory lease extension, whilst the rent on the existing term is capped at the rent that would have been payable under the pre-commencement lease. ↩

3. The SVM set out in Schedule 4 to the LFRA provides for how premium valuation calculations for enfranchisement and lease extensions under the 1967 Act and the 1993 Act are to be carried out. Broadly, this involves calculating the value of the rental liability for the remaining term of the lease (the term value) and the value of the property reverting to the landlord at the end of the term (reversion value). It is considered that the ‘term’ element of the SVM (paragraphs 25 to 26 and 35 to 39 of Schedule 4) could be used, potentially with some modifications, for assessing ground rent in quid pro quo leases. ↩

4. To calculate the term and reversion values it is necessary for a capitalisation rate and a deferment rate to be applied to the term and reversion values respectively, to calculate present day values of the future rent/reversion of the property. The LFRA empowers the Secretary of State to prescribe these rates, which will feed into the SVM. ↩