Government announces cap on ground rents

Millions of leaseholders across England and Wales are set to benefit from a major shake-up of the outdated leasehold system – with ground rents set to be capped at £250 a year, changing to a peppercorn cap after 40 years.

Ground rents were abolished for most new residential leasehold properties in England and Wales in 2022, but remained for existing leasehold homes. The English Housing Survey estimated that in 2023/24, leasehold owner-occupiers were paying an average ground rent of £304 a year.

Over five million leaseholders and future homeowners will benefit from stronger control, powers and protections through the draft Commonhold and Leasehold Reform Bill published.

Forfeiture, whereby leaseholders can lose their home and the equity they built up by defaulting on a debt as low as £350, will also be abolished and a new enforcement regime will rebalance the system – making it fairer between landlord and leaseholder.

A new process to make it easier for existing leaseholders to convert to commonhold will also be introduced under a revamped commonhold model where  homeowners will receive a stake in the ownership of their buildings and be given a stronger say in the issues that affect them, with greater control over how the building is managed and the bills they pay.

The reinvigorated commonhold system will ensure it works for all types of developments, as well as mortgage lenders, with strong management rules in place around repairs and leadership, and greater rights for homeowners.

Those living in the building will have a say in the annual budget and how the building is run, and new protections when things go wrong. Current leaseholders will also be given the opportunity to switch to commonhold, where the majority of residents agree to it.

Prime Minister Keir Starmer said “Good news for homeowners, we’re capping ground rent at £250. That means if you are a leaseholder, and your ground rent is more than £250, you’ll be paying less. And 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.”

Secretary of State for Housing 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.

“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.”