Ground rents to be capped on most existing residential leasehold properties
The government has proposed a wide-ranging package of residential leasehold reforms in the draft Commonhold and Leasehold Reform Bill published on 27 January. It forms part of a wider programme of reform aimed at addressing what ministers describe as “longstanding concerns that escalating and unregulated ground rents have harmed leaseholders, made flats harder to sell or remortgage, and acted as a burden on consumers”.
Existing residential leases will have ground rents capped at £250 per year, reducing to a peppercorn after 40 years. New leasehold flats already have ground rent banned under existing law since 2022, under the Leasehold Reform (Ground Rent) Act 2022.
A key issue still under debate is whether, and if so how, landlords will be compensated for the loss of ground rent income. Any compensation mechanism is likely to attract scrutiny, particularly given concerns about interference with freeholders’ contractual and property rights.
It is also proposed that existing leaseholders will be able to convert to commonhold where the majority of those living in the building agree to it, using a new process and revamped model, with stronger management rules in place around repairs, meaning greater rights for homeowners who will "receive a stake in the ownership of their buildings and be given a stronger say in the issues that affect them, with greater control over how the building is managed and the bills they pay”.
Also up for abolition is forfeiture, with a new enforcement regime in place to give a more balanced system. Under the current forfeiture rules, long been criticised as disproportionate, leaseholders can lose their home if they default on a debt as low as £350.
The bill has not yet been introduced formally into Parliament, therefore is subject to consultation and potential amendment, particularly in relation to interference with freeholders’ contractual property rights. These proposed reforms are a significant shake-up of residential property law, building on the government’s ongoing implementation of the Leasehold and Freehold Reform Act 2024, including measures to enhance transparency around service charges, enabling leaseholders to scrutinise costs more effectively and hold landlords to account.
Posted on 02/24/2026 by Ortolan
