The UK government has announced plans to cap ground rent at £250 per year for leasehold properties in England and Wales, as part of broader reforms to the leasehold system. The changes, outlined in the draft Leasehold and Commonhold Reform Bill, also include a ban on new leasehold flats and measures to give homeowners greater control over property management.
Immediate Action & Core Facts
The government will cap ground rent at £250 annually, with the fee set to drop to a "peppercorn" rate—effectively zero—after 40 years. The reforms aim to address concerns over rising ground rent costs, which can make properties difficult to sell or finance. The changes follow years of debate and lobbying from leaseholders and campaigners.
Deeper Dive & Context
Background on Leasehold and Ground Rent
Leasehold properties, which account for around five million homes in England and Wales, require homeowners to pay ground rent to the freeholder for the land beneath their property. Ground rents were abolished for most new residential leasehold properties in 2022 but remained for existing homes. The average annual ground rent in 2023/2024 was £304, with some leaseholders facing steep increases tied to inflation or fixed intervals.
Government and Political Reactions
Prime Minister Keir Starmer announced the ground rent cap in a video posted on TikTok, emphasizing the cost-of-living impact on leaseholders. The Labour government has framed the reforms as fulfilling a manifesto pledge, despite earlier reports of internal disagreements over the cap’s potential effects on pension funds that own freeholds. Former Housing Secretary Angela Rayner urged the government to stick to its commitments, while the Green Party called for the complete abolition of leasehold.
Broader Reforms and Implications
The draft bill also proposes banning new leasehold flats and introducing commonhold as the default tenure, giving homeowners more control over building management. Forfeiture rules, which allow leaseholders to lose their homes over small debts, will be abolished. The reforms aim to address long-standing issues in the leasehold system, though some campaigners argue they do not go far enough.
Opposition and Industry Concerns
Property investors and some pension funds have raised concerns about the financial impact of the reforms, particularly the potential loss of income from ground rent. However, the government has emphasized its commitment to supporting leaseholders, with Housing Secretary Steve Reed stating that the changes will prevent unaffordable ground rent charges.
The draft bill is set to be introduced on Tuesday, with the ground rent cap expected to come into force by late 2028. The reforms mark a significant shift in property ownership rules, though their full impact will depend on implementation and further consultations.