Millions of leaseholders in England will see ground rents capped at £250 a year, as part of sweeping reforms to the leasehold system. The changes, expected to come into effect in 2028, also include a ban on the sale of new leasehold flats and new powers for homeowners.
The Government’s new legislation marks a major shift in property law, aiming to address long-standing concerns over rising costs and opaque management practices. The draft Commonhold and Leasehold Reform Bill, published today, is said to benefit over five million leaseholders by offering greater control and transparency.
The current leasehold model, which allows freeholders to charge residents for owning the land beneath their homes, has long been criticised as outdated and unfair. Under this system, some homeowners have found themselves paying thousands of pounds a year in ground rent, with limited oversight or means to challenge costs. The reform is being presented as a way to restore balance in the housing market.
Ground Rent Capped and Forfeiture Scrapped
A key provision of the bill is the introduction of a £250 annual cap on ground rents, with the amount reducing to a nominal sum (known as a peppercorn) after 40 years. According to the Ministry of Housing, Communities and Local Government, the cap applies to most leasehold contracts signed before July 2023 and is expected to save homeowners up to £4,000 over the course of a lease.
Currently, many leaseholders pay ground rent for no apparent service, and some contracts contain “doubling clauses” that cause rent to escalate dramatically every ten years. These clauses have made certain properties unsellable, as mortgage lenders view them as financially risky. The Government stated the cap will not be offset by increases in other charges, and developers will not be allowed to bypass the rules.
Also included in the reform is the abolition of forfeiture, a legal mechanism that allows freeholders to repossess a property if leaseholders owe as little as £350 in charges. According to MHCLG, this 100-year-old law will be replaced by a court-led process with “strict safeguards” to prevent excessive penalties.
The Residential Freehold Association, which represents freeholders, criticised the cap as “wholly unjustified” and warned it could harm investor confidence. Meanwhile, the Competition and Markets Authority welcomed the proposals, saying they will prevent families from being “trapped” in contracts with escalating fees.
Ban on New Leasehold Flats and Pathway to Commonhold
In another major move, the Government has confirmed that developers will be barred from selling new flats as leasehold. Instead, future flats will be constructed and sold under a commonhold model, allowing residents to collectively own and manage their buildings. According to the Government’s announcement, this structure will eliminate the role of landlords charging fees unrelated to services.
The shift to commonhold, used widely in countries like the US and Australia, marks a fundamental change in English property law. While new rules are still under consultation, the Government said it aims to make resident-controlled building management the standard. Commonhold ownership would also give residents a greater say in repairs, budgets and local decisions.
Existing leaseholders will be given the option to switch to commonhold more easily. Though precise mechanisms have not yet been detailed, the Ministry says the process will be simplified to encourage uptake. According to a recent government blog, this reform will help flat owners achieve outright ownership and bring long-term financial certainty.
As part of the wider overhaul, measures are also being introduced to bring more transparency to service charges and improve residents’ ability to challenge excessive costs. The bill includes powers for tribunals to replace underperforming management companies, as part of a broader effort to ensure accountability in property management.
