Big Leaseholder Reforms Announced

The UK government have just announced a breaking change to the leaseholder system in England and Wales through a draft legislation introducing a £250 a year cap to ground rents for leasehold homes for millions of leaseholders across England and Wales.

The cap has been released as part of the Draft Commonhold and Leasehold Reform Bill, set out as a policy paper and is expected to take place from 2028. With an estimated ‘5m leaseholder homes‘ in the UK, ministers expect the change to benefit up to ‘900,000 leaseholders’.

The introduction of the change is a positive move by the UK Labour Government, and was announced by Prime Minister Kier Starmer on TikTok. On TikTok, Starmer stated, “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 announcement has further been cemented through a government published press release.

This cap is part of a bigger leasehold reform by the UK government and a commitment to a manifesto pledge in an effort to ease the cost of living for millions, whilst transforming a highly criticised, historically feudal leaseholder system.

What are ground rents?

Ground rents are a payment fee that leaseholders have to pay freeholders to live on land they do not own, and this is often fixed for a number of years. Leasehold owners, whilst they own the property, will have to pay a ground rent, service charge and mortgage repayments. Ground rents have been controversial and highly criticised as a payment in which the leaseholder receives nothing in return, have seen to escalate and are part of the feudal era system of homeownership. Housing Secretary Steve Reed, in welcoming the new announcement, branded ground rents as “scam payments”.

What are the key changes in the announcement?

Ground Rents capped at £250
Ground Rents to be reduced to a “peppercorn” rate after 40 years.
New Leaseholder flats will be banned moving forward
Existing leaseholders will be easily able to switch to commonhold as a default tenure
Forfeiture will be scrapped
Clear transparency on service and maintenance charges
Crackdown on freecehold
100-year lease extension reforms
A new substitute property manager
Government exploring resident-controlled management

The Bill remains in draft form and must still pass through Parliament before becoming law. However, the announcement has been widely welcomed as a significant step within the UK Housing Market towards reforming the leasehold and commonhold system in England and Wales.

The government is also currently running an open consultation on banning leasehold for new flats open to 24th April 2026 and making a move to commonhold universal, indicating further changes may follow.

UK property market experts welcome the announcement and share their commentary below:

Mark Chick, ALEP director and Senior Partner at Bishop & Sewell LLP, comments:

“This draft legislation is long-awaited, both by the industry and by the 5 million plus leaseholders in England and Wales. Reforming tenure structures may not attract the same attention as meeting housebuilding targets, but it remains a cornerstone of housing delivery. The structure of ownership underpins how communities are managed, maintained and held to account and reform was long-overdue.

There is clear political and public pressure to accelerate change, but reforms of this magnitude must balance speed with care. Rushed legislation rarely delivers clarity or certainty. The experience of implementing Leasehold and Freehold Reform Act (LAFRA) shows how important it is to get the detail right.

In conclusion, Mark Chick said, “This Draft Bill represents the most substantial shift in land tenure for more than two centuries. ALEP and its members are ready to contribute to the development of a system that delivers genuine long term benefits for leaseholders, freeholders and the wider housing sector. We are also committed to supporting constructive dialogue between government, leaseholders and professionals in this complex but critical area of property law.”

Paula Higgins, Chief Executive of the HomeOwners Alliance, comments:

“We have consistently called for ground rents to be abolished and reduced to a peppercorn, because homeowners should not have to pay for the ground under the home they own. We are very pleased the government’s draft Bill promises to cap ground rents to £250 and eventually peppercorn for leaseholders and put an end to the outrageous practise of escalating ground rents. But flat owners should be aware it is a proposal, not yet the law, and there are still significant hurdles to clear before these changes take effect. After years of delay, the financial sector and vested interests should now step aside and allow these reforms to go unchallenged. Time has been called on treating homeowners as a lucrative income stream. ”