The UK Government has announced a major overhaul of England and Wales' leasehold system, capping ground rents at £250 a year. The reform will save more than five million leaseholders an estimated £4,000 each over their lease term – totalling £12.7 billion.
The draft Commonhold and Leasehold Reform Bill addresses what Prime Minister Sir Keir Starmer called a critical cost-of-living issue. In a TikTok video, he said: "I've spoken to so many people who say this will make a difference to them worth hundreds of pounds. That's really important because the cost of living is the single most important thing across the country."
The reform details
The cap targets the 770,000 to 900,000 leaseholders currently paying over £250 annually in ground rent – charges freeholders collect without providing services in return. Last year alone, leaseholders paid more than £600 million in total ground rents. The government expects to implement the reform by late 2028.
Housing Secretary Steve Reed said: "If you own a flat you can be forced to pay ground rents that can become completely unaffordable. 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."
Industry pushback
The reform has triggered fierce opposition from investment firms and freeholders. Savings and investment firm M&G warned the changes are "disproportionate" and will "negatively impact savers and companies that have chosen to invest in UK assets." The company expects a £230 million one-off hit and a £15 million annual impact to operating profit.
The Residential Freehold Association called the cap "wholly unjustified." A spokesperson said the government's draft bill would "tear up long-established contracts and property rights, which are pillars of the UK's investment reputation." The trade body warned the bill would send a "dangerous and unprecedented signal to the wider institutional investment sector."
Political pressure
Former deputy prime minister Angela Rayner had urged the government to follow through on its manifesto commitment. Writing in the Guardian earlier this month, she said wealthy investors had "subjected" the government "to furious lobbying" and warned that failing to fix this "obvious injustice" could erode public trust.
The Competition and Markets Authority has been cracking down on mis-selling of leasehold homes with unlawful contract terms since 2019. Chief executive Sarah Cardell said: "Our action has freed thousands of homeowners from doubling ground rents, and we have long supported a cap on ground rents to make sure all leaseholders get the fair deal they deserve."
Wider support
Property and landlord organisations backed the reforms. Timothy Douglas of Propertymark said escalating ground rents make properties difficult to sell and called the cap a key step towards a fairer leasehold system.
The National Residential Landlords Association welcomed the certainty. Chief policy officer Chris Norris noted that around one in four leasehold homes are in the private rented sector, adding that the cap on ground rents will enable landlords to plan more effectively for future expenditure and business costs.
Mark Chick, director of the Association of Leasehold Enfranchisement Practitioners, called the reform long-overdue.
The bill also includes provisions to ban new leasehold flats, allow existing leaseholders to switch to commonhold, and abolish forfeiture – where leaseholders can lose their home for debts as low as £350.
Note: This article was created with Artificial Intelligence (AI).
