Breaking Free from the AST Trap – Welcome News for Leaseholders

The Renters Reform Bill received Royal Assent in October 2025. Whilst this Bill primarily focusses on protections for tenants (by abolishing ‘no fault’ evictions), it will also remove what has been coined the ‘AST Trap’ for owners of leasehold properties.  

The owner of a leasehold property will pay a ‘ground rent’. This is a small sum of money paid annually to a Freeholder (also called a Landlord). It can be anything from a few pounds to a few hundred pounds a year. The property’s Lease will require the Owner (the Leaseholder) to pay the ground rent in full and on time each year. Failure to do so is a breach of the Lease.

If the ground rent is not paid, enforcement action can be taken against the Leaseholder.

In the event of enforcement action being taken against the Leaseholder for possession of the property, there are a number of reliefs available to the Courts  

However, where a leasehold property has a ground rent over £250 per annum,  there have been concerns that the provisions of the Housing Act 1988 could apply and the Lease could be treated as an ‘Assured Shorthold Tenancy’ (AST).

So why is this an issue?

This has been a long-standing concern for legal advisors and mortgage lenders because the Housing Act 1988 contains mandatory grounds for repossession in Section 8 of the Act; non-payment of ground rent being one of them. This makes taking possession of the property much easier for the Freeholder.

Where the ground rent exceeds £250 per annum (or is due to exceed this amount during the term of the Lease) mortgage lenders have refused to proceed unless the ground rent is reduced below the threshold or an indemnity policy is put in place to protect their interests. Both avenues can be time consuming and costly.

The Renters Reform Bill, which is due to come into force on 27^th December 2025 as the Renters Rights Act 2025, will remove this risk. This is welcome news for Leaseholders.

However, it is imperative that, no matter how much the ground rent is, Leaseholders must ensure it is paid in full and on time to prevent being in breach of the terms of the Lease.  

If you are purchasing a Leasehold property and would like a quote, please call our helpful and friendly team at Mosshaselhurst Solicitors on 01606 74301.