Major Leasehold Overhaul: Ground Rents Capped and Commonhold Rights Introduced
The Government has announced a comprehensive package of leasehold reforms that will fundamentally reshape property ownership in England and Wales. Under the sweeping changes, ground rents for leaseholders will be capped at a maximum of £250 per year, providing significant financial relief for hundreds of thousands of homeowners.
Ending the 'Scam' and Empowering Homeowners
Prime Minister Sir Keir Starmer revealed the plans in a video posted on TikTok, emphasising that the reforms would make a substantial financial difference to households across the country. "I've spoken to so many people who say this will make a difference to them worth hundreds of pounds," Starmer stated. "That's really important because the cost of living is the single most important thing across the country."
Housing Secretary Steve Reed described the current system as a "scam" where leaseholders pay ground rent to individuals or organisations without receiving any services in return. "The amount that you pay is uncapped, so you can pay through the nose more and more money, year after year, and you don't know how much it's going to be," Reed told Times Radio.
Key Provisions of the Reform Package
The draft Leasehold and Commonhold Reform Bill, introduced on January 27, contains several groundbreaking provisions:
- Ground Rent Cap: A maximum annual ground rent of £250 for all leaseholders
- Commonhold Transition: Existing leaseholders will gain the right to switch to commonhold ownership
- New Build Restrictions: A ban on new leasehold flats, promoting alternative ownership models
- Legal Protections: Additional support through the accompanying Leasehold Reform Act
Reed emphasised that the reforms would save "almost a million people" money while eliminating the uncertainty of escalating ground rent payments. The Government expects the legislation to become law by next year, with implementation scheduled within the current Parliament.
Industry Opposition and Investor Concerns
The proposals have drawn significant criticism from the Residential Freehold Association (RFA), the trade body representing professional freeholders. Ben Hurst from Lanc Live reports that the RFA described the ground rent cap as "wholly unjustified" and warned of potential damage to investor confidence in the UK housing market.
An RFA spokesperson stated: "The inclusion of a ground rent cap 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."
The association further argued that the reforms would "tear up long-established contracts and property rights" that form pillars of the UK's investment reputation. They cited the previous Government's impact assessment suggesting compensation could exceed £27 billion and warned that forcing professional freeholders from the sector could hinder building safety projects and disrupt residents' daily lives.
Government Assurance and Implementation Timeline
In response to concerns about legal challenges, Reed confirmed that the Government has "taken all the measures we can" to ensure the plans are "legally watertight." He specifically addressed compensation concerns, stating that freeholders would not receive compensation for the ground rent cap and would not be permitted to offset losses through increased service charges.
The Housing Secretary highlighted the historical significance of the reforms, noting that "people have been campaigning for decades, centuries even, to get these changes through" and that it was this Government delivering on those long-standing demands.
The comprehensive reform package represents one of the most significant changes to property ownership structures in recent decades, aiming to shift power from freeholders to homeowners while addressing what the Government describes as fundamental unfairness in the current leasehold system.
