The end of ground rent AST traps
The Renters’ Rights Act 2025 finally received Royal Assent and became law on 27 October 2025. This new legislation has been long awaited and will see significant reforms to the private renting sector, with key improvements for the protection for tenants, including changes to current tenancy systems and eviction processes.
One change due to shortly take place is the end of “assured shorthold tenancy (AST) traps”, currently affecting long-term residential leases.
Current law
An owner of leasehold property will pay ‘ground rent’ under their lease, and failure to do so is a breach of its terms. Since the Housing Act 1988, leasehold properties with ground rent exceeding £250 per annum (or £1,000 per annum in Greater London) could be treated as an AST despite being long leases. Previously this did not cause a problem as ground rents were traditionally a nominal sum, however as developers began granting long leases with higher ground rents, these leases inadvertently became ASTs. This has now been coined as the “AST trap”.
The consequence of this is that these leasehold properties have been exposed to the eviction mechanisms originally intended for short-term tenancies. Under Section 8 of the Housing Act 1988, a landlord can evict a tenant under certain grounds for repossession, and non-payment of rent is a mandatory ground. As a result, freeholders of long leases can legally evict a long leaseholder if they are in at least 2 months of ground rent arrears (where the rent is payable yearly), much like a landlord could with a standard short-term rental property. There is no discretion for the court and no relief available to the leaseholder or their mortgage lender.
Changes to the Law and timeframes
Fortunately, the Renters’ Right Act has now addressed this issue by explicitly excluding long leases over 21 years from being classified as an assured tenancy, bringing about a clearer legal status of long leases and more security for those who own them.
Whilst most of the changes under the Act will be implemented in stages starting from 1 May 2026, this particular change is due to come into effect on 27 December 2025, two months after Royal Assent.
Benefits for leaseholders
From 27 December 2025, freeholders will no longer be able to use this legislation to evict a long leaseholder. Instead, if a leaseholder is in ground rent arrears, the freeholder will need to follow the enforcement action specified in the lease itself. These methods give the leaseholder a fairer opportunity to remedy their breaches before facing the risk of repossession.
These changes will also be a positive for lender requirements, as high or escalating rent should be seen as less of a risk for their security, with fewer lenders asking for an indemnity insurance policy to mitigate the risk.
Conclusion
If you have any questions about anything mentioned in this article, or how the Renters Rights Act may impact you, whether you are a landlord or tenant, please do not hesitate to get in touch with our dedicated Landlord and Tenant team via 01202 558844.
