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the reforms would rebalance the relationship between landlords and leaseholders, tackling what he described as an “outdated and unfair system” that has, for too long, impaired the dream of homeownership for many.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

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.”