The Prime Minister has confirmed a major change to the leasehold system in England and Wales: ground rents will be capped at £250 per year, with the long‑term plan to reduce them to a peppercorn rate after 40 years.
This announcement forms part of the draft Commonhold and Leasehold Reform Bill, which aims to modernise homeownership and ease financial pressure on millions of leaseholders.
For many people, ground rent is a confusing and often frustrating part of owning a leasehold property. At Dudden Law, we help clients navigate these issues every day, so this update marks a significant shift in the landscape.
What is Ground Rent?
Ground rent is a fee paid by a leaseholder to the freeholder for the right to occupy the land on which their home sits.
In England and Wales, there are around 3.8 million leasehold properties where ground rent is still payable. Many leaseholders pay modest amounts, but others face escalating or high annual charges that can make their homes difficult to sell or mortgage.
What has the Government announced?
The Prime Minister has confirmed:
- A cap of £250 per year on ground rents for most long residential leases.
- A transition to a peppercorn ground rent (effectively zero) after 40 years.
- A wider package of reforms aimed at ending the “feudal” leasehold system.
The Government estimates that many leaseholders could save hundreds of pounds each year, with some saving over £4,000 across the life of their lease.
Why is this happening?
Leaseholders have long raised concerns about unfair and unpredictable ground rent terms. Some leases include clauses that cause ground rent to double every few years, creating financial strain and making properties harder to sell.
The Government has stated that the cap is designed to:
- Reduce the cost of living for leaseholders.
- Make leasehold properties easier to buy, sell and mortgage.
- Address what it describes as “over the top bills for no clear service in return.”
Who will benefit?
The cap will apply to most long residential leases not already covered by existing legislation. The Government estimates that 770,000 to 900,000 leaseholders currently pay more than £250 per year and will therefore see a direct financial benefit.
Leaseholders in London and the South of England are expected to benefit the most, as these regions have the highest proportion of properties with ground rents above £250.
When will the cap come into force?
The Government has indicated that the cap is expected to take effect in late 2028, subject to the passage of the draft Bill through Parliament.
What does this mean for you?
If you are a leaseholder paying more than £250 per year in ground rent, this reform could significantly reduce your annual costs. It may also make it easier to sell your property in the future, as high or escalating ground rents often deter buyers and lenders.
If your ground rent is already below £250, you may not see an immediate financial change, but the long‑term shift towards peppercorn rents will still benefit you over time.
For those considering extending their lease or purchasing their freehold, the cap may also reduce the cost of doing so, as these processes often take ground rent levels into account.
How Dudden Law can help
Leasehold law can be complex, and upcoming reforms may raise questions about your rights, obligations and options. Our property team at Dudden Law can:
- Review your lease and explain how the cap may affect you.
- Advise on lease extensions or freehold purchases.
- Support you if you are buying or selling a leasehold property.
We aim to make the process clear and manageable, ensuring you understand every step.