UK leasehold and ground rent reform

The UK government is pursuing leasehold reforms through the draft Commonhold and Leasehold Reform Bill. Initial proposals focus on capping most existing long residential ground rents at £250 per year, with a plan to eventually reduce them to a peppercorn rent after 40 years. This aims to address issues affecting approximately 3.8 million leasehold homes in England and Wales.

As the reform process continues, industry bodies like Propertymark have urged the government to accelerate these changes. A report titled ‘Leasehold: Still a Life Sentence?’ suggests that many leaseholders face ongoing difficulties, noting that 86% have experienced service charge increases in the last two years and 89% find it difficult to challenge unfair charges. These costs are reportedly creating barriers to property sales.

Concurrently, the government is consulting on leasehold enfranchisement valuation rates under the Leasehold and Freehold Reform Act (LAFRA). This consultation involves determining deferment and capitalisation rates, which are critical factors in calculating the premiums payable by leaseholders during the redistribution of value between leaseholders and freeholders.