Government Caps Ground Rents at £250 in Major Leasehold Reform Shake-Up

Key changes include:

• Ground rent capped at no more than £250 a year for existing leaseholders - with plans to phase this down to a peppercorn (effectively zero) after 40 years.

• Ban on new leasehold flats, meaning new apartment developments will instead be sold under more transparent and owner-friendly arrangements.

• Right for existing leaseholders to convert to commonhold ownership, giving them a shared stake in their building and more say over management and costs.

• Abolition of forfeiture for small debts, protecting homeowners from losing their homes over minor arrears.

Prime Minister Sir Keir Starmer announced the ground rent cap in a video posted on social media, saying the reforms would keep more money in the pockets of families and help ease cost-of-living pressures. “Good news for homeowners, we’re capping ground rent at £250. That means if you are a leaseholder with ground rent above this, you’ll be paying less,” he said. “I’ve spoken to so many people who say this will make a difference worth hundreds of pounds.”

According to government officials, the cap is expected to benefit more than five million leaseholders, with many households potentially saving several thousand pounds over the life of their lease. It could also unlock stalled property sales that have been hampered by onerous ground rent terms that deter lenders or buyers.

Housing Secretary Steve Reed said the reforms would rebalance the relationship between landlords and leaseholders, tackling what he described as an “outdated and unfair system” that has, for too long, impaired the dream of homeownership for many.

While consumer groups and leaseholder advocates have broadly welcomed the changes, industry voices - including major investors - have expressed concern about the retrospective nature of the reforms and their implications for existing contracts and investment in the UK housing market.

The draft Bill now moves into pre-legislative scrutiny ahead of introduction to Parliament, with implementation of the new ground rent rules currently anticipated in late 2028.

Industry Reactions

Andrew Bulmer, Chief Executive of The Property Institute, said:  

“We welcome the publication of the Draft Commonhold and Leasehold Reform Bill, which will give homeowners more control of the estates and communities they live in and reduce high and escalating ground rent costs for many leaseholders. These are important steps forward in improving the lives of homeowners in England and Wales.   

“Commonhold will bring new responsibilities for homeowners, including building safety, financial governance, and upkeep of shared areas. Our members regularly work with residents who manage their own buildings – two-thirds of the buildings TPI members manage are resident-controlled. We embrace the move to commonhold and stand ready to support future generations of commonholders to live in safe, well-managed homes. 

“It is vital that commonholders, as well as leaseholders, can rely on a professional and regulated property management sector to support them. We want to see Government also deliver on its commitment to mandatory qualifications, and to bring forth regulation of managing agents, to further improve outcomes for homeowners. 

“Some of these reforms will be complex, and there will be important details to scrutinise, for example, on a replacement for forfeiture, to ensure buildings with arrears can continue to function. It is very positive that the Select Committee will first scrutinise a draft of the Bill with all stakeholders.”

Sean Hooker, Head of Redress, Property Redress

"This is a major reform for the sector and will clarify and reassure leaseholders that their ongoing costs for ground rent are certain and there are no hidden or unexpected hikes. Whilst the redress schemes do not determine on ground rent disputes, we welcome the move as the confusing array of different arrangements does cause complaints, especially when trying to buy or sell a leasehold property.
The other moves, such as the abolition of the right forfeiture, which has been used for minor debts and breaches of lease, is also a positive move as we have seen this used to frustrate the process of redress when leaseholders, often out of desperation, withhold charges they feel unfair or they question the cost or quality of the service they receive.
The moves to repeal leasehold entirely and bring in a new and fairer system will also mean many benefits for those people who chose to buy properties with common and shared tenure and services.
Current leaseholders should, however, understand this is the start of the process with consultations and the legislation will need to be introduced and progressed through parliament. Thereafter, the changes will be phased in, with new properties being prioritised and existing leases converted in the future."

Gavin Walmsley, leasehold specialist at Irwin Mitchell

“This is one of the most significant shifts in the leasehold system in decades. The £250 cap followed by a peppercorn rate will have major implications for existing leases. Large freeholders and pension funds are highly likely to consider legal action, particularly around the question of compensation.

“The Government signalled its intention to revive commonhold in last year’s white paper, yet progress has been slow and today’s reforms raise complex issues for lenders, freeholders and leaseholders. The draft Bill will now move into pre-legislative scrutiny and subject to parliamentary timings, the ground rent cap could come it force late 2028. Further consultation and challenge is almost inevitable.”

Justin Herbert, Managing Director, RMG

“At RMG, we support reform and believe residents should be in control of how their buildings are run, and that’s already happening across many of the schemes we manage.

"Government has put forward plans to move to commonhold as it has identified the system is currently not working for many. But while commonhold is well-intentioned, full control comes with full responsibility. We have seen the consequences of that first-hand, including a scheme where fire safety failures led to a building being closed for years and residents left homeless.

"There is a better answer, one we successfully have in place in many schemes already. A blended model which puts residents in charge of every key decision, while experienced managing agents retain responsibility for building safety and regulatory compliance. It empowers residents without loading them with unmanageable risk and stress in the place they should just be able to call home. That is what meaningful reform must deliver.”