Draft reforms aim to phase ground rents to peppercorn and overhaul leasehold model across England and Wales
Ground rents for residential leaseholders in England and Wales are to be capped at £250 a year under draft legislation that would also phase them down to a peppercorn after 40 years and restrict most new leasehold flats.
The measures are contained in the Draft Commonhold and Leasehold Reform Bill, published this morning. Ministers say the reforms will overhaul home ownership for around five million leasehold properties and future buyers of flats.
Announcing the cap in a video on TikTok, prime minister Keir Starmer said: “I’ve spoken to so many people who say this will make a difference to them of hundreds of pounds. That’s really important because the cost of living is the single most important thing across the country. So this is a promise that we said we’d deliver and I’m really pleased that we’re delivering on that promise.”
@keirstarmer Exclusive: We are capping ground rents for everyone
♬ original sound - Keir Starmer
Under the plans, existing ground rents will be capped before stepping down to a peppercorn after four decades. The government argues this will tackle clauses that ratchet up ground rent, which have made some flats hard to sell or remortgage and raised concerns among lenders about long‑term affordability.
Abolition of forfeiture is a key element. At present, leaseholders can in some circumstances lose both their home and accumulated equity for arrears as low as £350. The bill would remove this remedy and put in place a new statutory enforcement regime intended to reset the balance between landlords and leaseholders.
New leasehold flats would generally be banned, with future schemes expected to use commonhold or other structures. Existing leaseholders would gain a more straightforward process to convert to commonhold, giving homeowners a collective interest in the building and formal rights over budgets, management decisions and major works.
Housing secretary Steve Reed (pictured right) said the package is designed to curb unaffordable charges and give leaseholders more control. “If you own a flat, you can be forced to pay ground rents that can become completely unaffordable,” he stated. “We said we’d be on the side of leaseholders – which is why today we are capping ground rent – helping millions of leaseholders by saving them money and giving them control over their home.
“The leasehold system has tainted the dream of home ownership for so many. We are taking action where others have failed – strengthening home ownership and calling time on leasehold for good.”
For mortgage professionals, the proposals go directly to how leasehold risk is assessed. A statutory ceiling on ground rents and clearer routes to commonhold could make it easier for lenders and brokers to price long‑term obligations and for conveyancers to advise on title. The government has indicated that many leaseholders could save more than £4,000 across the term of their lease, potentially improving debt‑service capacity and helping unblock transactions where buyers or lenders have been wary of escalating ground rents.
The reforms build on the Leasehold and Freehold Reform Act 2024, which aims to increase transparency over service charges, and follow the Renters’ Rights Act, which strengthened protections for private tenants. Together, the measures mark a wider reset of how housing tenure is regulated.
Investor and freeholder groups, however, warn that a binding cap on existing ground rents is a significant intervention in contract law. The Residential Freehold Association (RFA), representing professional freeholders, has voiced strong opposition.
A spokesperson for the RFA said: “The inclusion of a ground rent cap in the draft bill represents a wholly unjustified interference with existing property rights which if enacted, would seriously damage investor confidence in the UK housing market and send a dangerous and unprecedented signal to the wider institutional investment sector.
“Property rights and contract law are fundamental drivers of domestic and global investor confidence in the UK.”
The British Property Federation (BPF) also warned of consequences for pension‑fund‑backed assets and index‑linked investment strategies. “While we agree that rapidly escalating ground rents should be addressed, the proposed cap will interfere with investments made by pension funds and institutional investors over many years and undermine the government's pursuit of investment in this country,” said Danny Pinder, director of policy at British Property Federation.
Meanwhile, trade body Propertymark has welcomed the focus on existing leaseholders, whose ground rent obligations were untouched by the 2022 reforms for most new residential leases.
“We know from our research with member agents that leasehold properties with escalating ground rent will struggle to sell, even if priced correctly,” said Timothy Douglas, head of policy and campaigns at Propertymark. “Addressing ground rents for existing leaseholders is a key step towards a fairer leasehold system. It brings existing leaseholders on par with new leaseholders, and it tackles one of the largest barriers to selling leasehold properties.
“We also welcome steps to make it easier and cheaper to buy leasehold property and the ambition to transition towards commonhold, but agents and consumers will need clear guidance, education, and practical support to understand and navigate this change.
“A draft Bill provides a vital opportunity for policymakers to work with the sector to get the reforms right before legislation is passed into law. It is vital that the changes come in as soon as possible to support property transactions and that the costs are reduced for consumers.”
The bill will now be examined by MPs on the Housing Committee before progressing through Parliament. The government has indicated that, subject to legislative scrutiny and implementation work, the cap could take effect in late 2028.
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