What is a quid pro quo lease?
The name refers to an arrangement where a leaseholder explicitly agrees to pay a higher annual ground rent in return for paying a lower purchase price upfront. To qualify as a genuine quid pro quo arrangement, the reduction in the purchase price should be at least equal to the calculated value of the additional ground rent.
Such arrangements may be agreed when a lease is first granted or during a lease extension. However, the presence of a high ground rent does not, by itself, make a lease quid pro quo.
What does the UK Government want to establish?
The consultation seeks evidence from leaseholders, freeholders and professionals with direct experience of these arrangements.
It aims to establish:
- how common genuine quid pro quo leases are and when they are used
- whether they should be exempt from the £250 cap
- how they should be defined
- what evidence should be required to prove that a leaseholder received an equivalent reduction in the premium
- whether an independent specialist should verify that a lease qualifies
- how exempt leases should be treated when a property is sold.
The UK Government proposes that the freeholder should be responsible for proving that an arrangement qualifies. Possible evidence could include a written agreement showing the choices offered to the leaseholder or a declaration signed when the lease was granted or extended.
Leases assessed by a tribunal, an accredited body, or an independent specialist are being considered, along with the registration of exempt leases.
What could happen after the consultation?
No decision has yet been made on whether an exemption will be introduced or its final form . One outcome is that no additional exemption is created. Housing Minister Matthew Pennycook, MP, giving evidence to the Housing, Communities and Local Government Committee on 24 March, confirmed that evidence would need to be extremely compelling to justify an exemption.
A possible solution would be to allow ground rent under a qualifying lease to remain outside the £250 cap for 40 years, then fall to a peppercorn at the same time as other ground rents.
Successors in title present a particular challenge. A later buyer was not involved in the original negotiation and may not have received a corresponding reduction in the price they paid. The UK Government is therefore considering whether an exemption should continue only where the freeholder can show that the new leaseholder knew about the arrangement and benefited from a reduced premium.
Safeguards will be essential
Whilst an exemption could protect genuine agreements where a leaseholder knowingly chose to spread part of the purchase price through ground rent, it also risks adding complexity to a system the wider reforms are intended to simplify.
Determining whether a historic premium was reduced by an appropriate amount could require specialist valuation evidence about the property market at the time. Leaseholders and freeholders may also disagree over whether a meaningful choice was offered or whether the reduction genuinely matched the value of the additional rent.
An exemption defined too widely could lead to uncertainty, valuation disputes, and tribunal cases, particularly when an exempt lease is sold. Uncertainty about the status of a ground rent could complicate the information given to buyers, delay conveyancing and affect lending decisions.
Ground rent reform must improve the market
Propertymark has long campaigned for leasehold reform that is fair, transparent and workable for consumers and property professionals.
Our July 2026 report, Leasehold: still a life sentence?, found that 86% of leaseholder respondents had paid ground rent during the previous 24 months. Of those, 47% said it had at least a large negative effect on their personal finances.
Ground rent is also affecting transactions. Over half of leaseholders said that it had a significant negative impact on their ability to sell, while escalating ground rents were among the three most common barriers reported by estate agents.
We have welcomed action to cap existing ground rents but called on the UK Government to reconsider the proposed 40-year wait before they fall to a peppercorn. Reform must provide meaningful relief while improving confidence among buyers, sellers, lenders and agents.
Any exemption for quid pro quo leases must therefore be narrow, supported by clear evidence and straightforward to apply. It must not create a route for ordinary ground rents to escape the cap or introduce further uncertainty into leasehold sales.
Representing members
Propertymark will respond to the consultation on behalf of members. We would like to hear what individuals with experience of handling quid pro quo lease arrangements think of the proposed exemption. Get in touch with our Policy and Campaigns Team via [email protected].
We also encourage individuals to respond directly to the consultation.
The consultation applies to England and Wales and closes on 27 August 2026.
