Ground Rent to be Capped under Government Reforms

Overview of the Government’s Proposals

On 27 January 2026, the Government announced further detail about its plans to reform leasehold properties in England and Wales, by publishing the draft Leasehold and Commonhold Reform Bill. The draft bill has revealed plans to cap ground rent at £250 a year in England and Wales.

It is estimated that there are approximately five million leasehold properties in England of Wales, most of which are flats, and many of which require the leaseholder to pay the freeholder (i.e. the owner of the block) ‘ground rent’ which is effectively a rent for the use of the land beneath the building.

Ground rent was abolished for new leasehold properties in 2022, but continue to be collected by freeholders for existing leasehold properties.

Proposed Changes to Ground Rent

The Government’s reforms propose to cap ground rent at £250 per year, before abolishing ground rent entirely after 40 years.

Additional Leasehold Reforms in the Draft Bill

In addition to the proposed cap on ground rent, the draft bill proposes:

• A ban on leasehold flats, with a transition to commonhold instead;
• Statutory rights for existing leaseholders to convert their leaseholds to commonholds, giving them greater rights over the management of the freehold of their property;
• Abolition of forfeiture, the process whereby a freeholder can seize a property even if there are only relatively small arrears.

What Are the Intended Benefits?

The Government hopes that the proposed changes will bring greater affordability and improved saleability for leaseholders, as well as giving them more control over the management of where they live.

Implications for Freeholders

But what does this mean for freeholders?

There is a concern that the proposed reforms may deter investment in freehold properties, particularly from pension funds which often rely on income from ground rent as a stable investment. Freeholders may face significant financial and operational challenges in the coming years as a result of these reforms.

So what next?

If these proposed reforms could affect you, whether you are a leaseholder, freeholder, investor, or managing agent, early legal advice is essential. Our law firm has an experienced property litigation department that advises on leasehold disputes, ground rent issues, and the impact of legislative reform.

If you would like to discuss how these changes may affect your property interests, please contact us to speak with a member of our property litigation team.

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