On 27 January 2026, the UK government published its draft Leasehold and Commonhold Reform Bill, announcing various changes to the leasehold system in England and Wales. One of these changes is the cap of residential leasehold ground rents at £250 a year.
What are ground rents?
Ground rent is a charge paid by a leaseholder to a freeholder for the right to occupy the land their residential leasehold property is built on. It is generally charged annually but can be payable more frequently.
After the implementation of the Leasehold Reform (Ground Rent) Act 2022, ground rents were abolished for most new residential leasehold properties, however this did not extend to existing leasehold properties.
Why are caps being introduced?
The government has explained that this cap is an attempt to manage unregulated and unaffordable ground rent charges for existing leasehold properties. Their aim is to support leaseholders with the cost of living, claiming this will save many people hundreds of pounds a year, adding up to thousands saved through the term of the lease.
Many leases currently have escalating ground rent, where rent multiplies every certain number of years, which can become unaffordable for many people if there is no restriction on how high this can climb. This change is therefore a positive for many leaseholders facing this situation now or in the future.
As well as the obvious cost benefits for leaseholders, this change will hopefully see leasehold properties becoming easier to sell and mortgage. With this cap, properties will be more attractive to prospective buyers, and lenders will consider them less onerous and of lower risk.
When will this be implemented?
At present, it is expected that this change will take effect from late 2028.
The government have also announced that ground rent will ultimately be reduced to a “peppercorn” after 40 years – a legal term for effectively zero – under their reforms. As mentioned previously, this will bring the ground rent for existing leasehold properties in line with new leasehold properties.
The draft bill also announced that forfeiture is planned to be abolished, along with
commonhold replacing leasehold for new flats. These changes would represent wholescale changes to the current property ownership system for residential flats across the country.
If you have any questions about anything mentioned in this article, or any other landlord and tenant enquiries, please do not hesitate to get in touch with our team via 01202 558844 or via email at acrabbe@rawlinsdavyreeves.com (Alex Crabbe) or leveleigh@rawlinsdavyreeves.com (Lucy Eveleigh).
