UK leasehold reform proposes ground rent caps

The UK government is advancing leasehold reform through the draft Commonhold and Leasehold Reform Bill. A central proposal involves capping most existing long residential ground rents at £250 per year, eventually reducing them to a peppercorn rent after 40 years. This initiative aims to make leasehold less punitive and facilitate a transition toward commonhold as a standard tenure.

Research indicates that approximately 3.8 million leasehold homes in England and Wales have ground rent obligations, with up to 900,000 leaseholders paying more than £250 annually. Industry professionals have noted that high ground rents can negatively impact property sales and create difficulties in securing mortgages.

While reforms such as the Leasehold Reform (Ground Rent) Act 2022 have already removed ground rents from most new leases, the new proposals target older leases. Discussions continue regarding whether these issues are best solved by changing the tenure to commonhold or by implementing stronger regulations within the existing leasehold system, particularly concerning service charges and lease extensions.