Robert Hughes gave up trying to sell his flat on the third attempt. While Leeds Building Society was happy to approve his mortgage in 2018 to buy the £210,000 flat in Aylesbury, Buckinghamshire, three potential buyers have been unable to get a mortgage on it, or have been advised by their solicitors to steer clear because it comes with a £325 annual ground rent charge.

Banks will not normally lend on leasehold properties where the ground rent is more than £250 a year, or £1,000 a year in London. Hughes, a 31-year-old football coach, bought the two-bedroom new-build flat from the developer Abbey Homes six years ago, but now wants to move to a bigger home with his girlfriend, Rebecca Phillips, and baby son.

However, he cannot move on because Abbey Homes, which also owns the building and grounds as the freeholder, has refused to negotiate the ground rent, which is trapping him in his home. The only option is to pay between £12,000 to £15,000, which is unaffordable for the couple, to extend the lease from 96 to 186 years and reduce the charge to a minimal or “peppercorn” level.

Hughes says: “It’s ridiculous that you can be told you can’t sell something unless you cough up £15,000. We want to get rid of it. We could buy a house now, but we can’t get two mortgages. We’re stuck in limbo.”

Unable to sell, the couple have started renting out the flat and have rented a house in Oxfordshire for themselves, becoming so-called “accidental landlords”. Three of the other nine flats in the building are also rented out because their owners can’t sell them either.

Leeds Building Society no longer lends on properties with “risky” ground rent clauses, but this change came too late to save Hughes because, according to the building society, it “clarified our lending criteria in relation to ground rent in April 2018, just after this mortgage was completed, in light of the increasing number of unfair ground rents being imposed on borrowers”.

Hughes blames Browns Solicitors, which was recommended by Abbey Homes, for failing to raise the ground rent issue, but the firm was closed down by the Solicitors Regulation Authority in January last year. Abbey Homes was contacted for comment.

There are thought to be more than 100,000 leaseholders trapped by onerous ground rents, according to a parliamentary committee estimate in 2019. Harry Scoffin, the founder of the campaign group Free Leaseholders, says: “Ground rent is money for nothing, but it can also ruin people’s lives. Every day we are contacted by desperate leaseholders trapped in their homes and unable to sell because of toxic ground rent clauses, which are included as a forced condition of sale.”

Leaseholders pay a monthly service charge to cover buildings insurance, repairs and maintenance of communal areas, but ground rent is a charge for simply occupying the land the block of flats sits on. Paula Higgins, the chief executive of the advice body the HomeOwners Alliance, says: “There’s no justification or reason for ground rent to exist.”

Campaigners have long called for it to be abolished, or at least restricted, because if you do not pay it the freeholder can seize your home under the right of forfeiture. Ground rents on new leasehold properties have been limited to a peppercorn rate since June 2022, but there is no limit on what can be charged on existing leases. Since 2002 lease clauses that escalate the ground rent over time have become widespread as investors sought to make sure their income increased in line with inflation.

Hughes, like thousands of other trapped leaseholders, is hoping the new Labour government will get to grips with ground rent. Last week’s King’s Speech included plans to “tackle existing ground rents by regulating them so leaseholders no longer face unregulated and unaffordable costs”, but the details on how ministers plan to do this remain unclear.

Labour could cap all ground rents at a peppercorn amount, but ministers would face lobbying and legal challenges from freeholders, who use them as an investment opportunity. The softer option would be to cap existing ground rents at £250 annually, so leaseholders can sell their properties. This would save leaseholders £5.1 billion over ten years, according to the government’s impact assessment. It would then phase out the charge over a number of years to encourage investors to take their money elsewhere.

About 86 per cent of leaseholders pay ground rent, according to the government, with an average annual bill of £298 in 2021-22. The latest estimate from the Competition and Markets Authority (CMA) in 2020 shows that 18 per cent of leases, or 940,000, contain escalating ground rent clauses, where the charge rises frequently for no obvious reason. This increase can be in line with the retail prices index (RPI) measure of inflation, the property’s value, or it can double after a certain period.

The standard criteria of banks is that annual ground rents must be at most 0.1 per cent of the property’s value. Review or doubling periods that happen more often than every ten or twenty years, respectively, or other “unfair” escalations can also make a property unmortgageable.

Rocketing ground rents are seen as risky for lenders because it could make the mortgage unaffordable for the borrower in the future or, if the ground rent rises above the market norm, it could put off potential buyers and affect the value of the property.

There are three unappealing ways out of this mess for leaseholders. First, they could find a buyer who is willing to arrange an indemnity insurance policy that will cover their lender if ground rent is not paid and the property seized, if their bank accepts it.

Second, a seller could try to negotiate a “deed of variation” to change the lease to reduce the ground rent, but this is likely to be costly — about £6,000 — as the seller is paying compensation to the freeholder for loss of future income. John Townsend, a partner at the law company Lester Aldridge, says: “The leaseholder may also be asked to cover ancillary costs such as the freeholder’s legal fees.”

Third, the leaseholder could pay for a statutory lease extension, known as a section 42 notice, to reduce the ground rent to a peppercorn amount and extend the lease’s term by 90 years. The cost can depend on how long is left on the lease, the value of the property and the ground rent, but because you are paying all the ground rent in one go it can be very expensive.

Philip Jones, 56, who works in IT, bought his two-bedroom flat — one of three in a converted house in Westcliff-on-Sea, Essex — for £57,000 in September 1999. He has nearly paid off the mortgage, but he is unable to move on unless he pays at least £45,000 to remove the ground rent.

The ground rent on Philip Jones’s flat rises in line with RPI or doubles every ten years, depending on which number is higher

Jones’s lease was down to 66 years in 2014, so he paid his freeholder £13,500 to extend it and, he thought, change the ground rent to £250 a year rising with the RPI every ten years. However, when he received his annual bill this month it had risen to £500.

He discovered that his ground rent rises in line with RPI or doubles every ten years, depending on which number is higher. “I feel a bit stupid now that I’ve dug the lease out and seen what they’ve done, but I think [my solicitor] should have made me aware of it,” Jones says.

The management company, Arkasian, which works on behalf of the freeholder, said it would be unable to alter the ground rent, but that it could remove it if he paid to extend the lease. Jones had to pay a £90 administration fee just to get the quotes — it is £45,000, plus a further £600 in administration and legal fees to wipe out the ground rent, or £60,000 to extend the lease by 90 years as well. The freeholder would not disclose the calculations used to work out the costs.

Jones says: “The flat is worth about £300,000, so they are asking for about 20 per cent of the value just for the ground rent. I’m going to see what the government does, get the flat ready and hopefully there will be some changes.” Arkasian was contacted for comment. Jones’s freeholder, Hickling Properties Ltd, said it did not want to comment.