Keir Starmer Announces Major Ground Rent Shake-Up for Homeowners
The Government has unveiled a sweeping reform of the leasehold system, with Prime Minister Keir Starmer announcing a landmark overhaul that will cap annual ground rents at £250 for millions of homeowners across England and Wales. This radical move aims to eliminate spiralling costs and remove unfair financial barriers that have long made house sales difficult for existing leaseholders.
Key Changes in the Draft Legislation
Under the draft Commonhold and Leasehold Reform Bill, ground rent will be capped at £250 per year and will be effectively reduced to zero after 40 years. This specifically targets what the Government describes as "over-the-top" bills that currently provide leaseholders with no clear services or benefits in return for their payments.
The legislation also proposes a total ban on the creation of new leasehold flats, while existing residents will gain the legal right to switch to commonhold arrangements. This transition would grant homeowners significantly more control over their buildings and management decisions.
Additional Protections for Homeowners
Perhaps most significantly, the reform will abolish forfeiture rules that currently allow homeowners to lose their properties over debts as low as £350. This provides essential security for residents who have previously lived under the constant threat of losing their built-up equity over relatively minor financial disputes.
The Government estimates that these changes could save leaseholders a staggering £12.7 billion over their collective lease terms, framing the reform as a vital measure to combat the rising cost of living pressures facing homeowners nationwide.
Industry Concerns and Market Impact
Despite the clear benefits for homeowners, financial institutions including M&G have warned that the cap could damage investor confidence and lead to significant one-off hits to profits. Critics argue that tearing up established contracts sends a negative signal to the wider institutional investment sector that has traditionally supported the leasehold market.
There are currently around 3.8 million leasehold properties with ground rent obligations across England and Wales, where people own the right to occupy a property through a lease for a limited number of years from a freeholder. Unlike service charges, there is no requirement for freehold owners to provide any service in return for ground rent payments.
Regional Impact and Implementation Timeline
The Government estimates that between 770,000 and 900,000 leaseholders currently pay more than £250 annually in ground rents, with 490,000 to 590,000 of these concentrated in London and the South East. Last year alone, leaseholders paid more than £600 million in ground rents across the country.
The legislation is expected to take effect in late 2028, subject to standard parliamentary approval processes. Once implemented, it will bring existing leaseholders in line with protections afforded to new homeowners, standardising safeguards across the entire housing market and creating a more equitable system for all property owners.
