Millions of leaseholders across England and Wales are set to benefit from a major shake-up of the outdated leasehold system – with ground rents set to be capped at £250 a year, changing to a peppercorn cap after 40 years.

Making the announcement in a video on TikTok this morning, Prime Minister Keir Starmer sets out how the cap will save some families hundreds of pounds as the cost of living is the single most important issue across the country.

New leasehold flats will also be banned and homeownership strengthened thanks to groundbreaking legislation that will give people control over their homes and calls an end to the feudal leasehold system which dates to medieval times.

Over 5 million leaseholders and future homeowners will benefit from stronger control, powers and protections, through the draft Commonhold and Leasehold Reform Bill published today (Tuesday 27 January), which will fundamentally rewire homeownership across England and Wales.

It will cap ground rent at £250 a year before ultimately reducing it to a peppercorn after 40 years – marking the end of residential leaseholders paying over the top bills for no clear service in return.

This move will ensure leaseholders keep more of their hard-earned cash, with many seeing savings of over £4,000 over the course of their lease, improving cost of living for millions. This will also unlock house sales for leaseholders whose lives have been put on hold because of ground rent terms that make their homes hard to sell.

In a video on TikTok making the announcement, Prime Minister Keir Starmer said:

Good news for homeowners, we’re capping ground rent at £250. That means if you are a leaseholder, and your ground rent is more than £250, you’ll be paying less.

And I’ve spoken to so many people who say this will make a difference to them of hundreds of pounds.

That’s really important because the cost of living is the single most important thing across the country.

So this is a promise that we said we’d deliver and I’m really pleased that we’re delivering on that promise.

Secretary of State for Housing Steve Reed said:

If you own a flat you can be forced to pay ground rents that can become completely unaffordable. We said we’d be on the side of leaseholders – which is why today we are capping ground rent – helping millions of leaseholders by saving them money and giving them control over their home.

The leasehold system has tainted the dream of home ownership for so many. We are taking action where others have failed –strengthening home ownership and calling time on leasehold for good.

Forfeiture, whereby leaseholders can lose their home and the equity they built up by defaulting on a debt as low as £350, will also be abolished and a new enforcement regime will rebalance the system – making it fairer between landlord and leaseholder.

A new process to make it easier for existing leaseholders to convert to commonhold will also be introduced under a revamped commonhold model where  homeowners 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.

The reinvigorated commonhold system will ensure it works for all types of developments, as well as mortgage lenders, with strong management rules in place around repairs and leadership, and greater rights for homeowners.

Those living in the building will have a say in the annual budget and how the building is run, and new protections when things go wrong. Current leaseholders will also be given the opportunity to switch to commonhold, where the majority of residents agree to it.

The reforms build on action currently being undertaken by the government to implement the Leasehold and Freehold Reform Act 2024, including increased transparency over service charges so that leaseholders can better hold their landlords to account.

This comes as the government passed through its landmark Renters’ Rights Act, delivering the biggest boost to renters’ security and protections in a generation – ending unfair ‘no fault’ evictions, multiple rent hikes and bidding wars, and giving millions more stability and control over their homes.

Supportive stakeholder comments

Sarah Cardell, Chief Executive of the CMA said:

CMA action has freed thousands of homeowners from doubling ground rents, and we have long supported a cap on ground rents to make sure all leaseholders get the fair deal they deserve. The CMA welcomes the government’s proposals so people won’t have to struggle against these rising fees anymore – particularly when many are already grappling with high costs elsewhere.

RICS Chief Executive Justin Young said:

Today’s announcement offers greater certainty and clarity on the Government’s proposed reforms to the leasehold system, including long-awaited action on ground rents. The publication of the draft Commonhold and Leasehold Reform Bill is a critical step in this process. RICS looks forward to working with members, MHCLG, and other key stakeholders to deliver the best outcomes for consumers and the market”.

Martin Boyd, Chair of the Leasehold Advisory Service said:

This is a significant milestone for leaseholders and marks the beginning of the end for the leasehold system as we know it. The draft Bill tackles some of the most damaging features of leasehold, including high and escalating ground rents and the threat of forfeiture, which has left some leaseholders at risk of losing their homes over relatively small debts.

More fundamentally, the Bill signals a decisive shift away from leasehold as the default form of home ownership. Moving towards commonhold, and making it easier for existing buildings to convert where leaseholders choose to do so, has the potential to give homeowners genuine control, security and long-term certainty over their homes.

Chris Norris, Chief Policy Officer for the National Residential Landlords Association (NRLA) said:

Around one in four leasehold homes are in the private rented sector. Given this, the greater certainty provided by today’s announcements is welcome.

In particular, the cap on ground rents will enable landlords to plan more effectively for future expenditure and business costs.

Notes

• Full video can be found on the Prime Minister’s TikTok account: @keirstarmer
• The draft Bill will now move into pre-legislative scrutiny, expected to be carried out by the HCLG Select Committee. Subject to parliamentary timings, the ground rent cap could come into force in late 2028.
• We are committed to working with all stakeholders through the pre-legislative scrutiny process, noting further engagement on appropriate treatment of quid pro quo leases (where the purchase price was demonstrably lower as a result of a higher level of ground rents) but being clear this is not an open door for exemptions.
• The Leasehold Reform (Ground Rent) Act 2022 already ended ground rents for most new long residential leases going forward; this announcement focuses on tackling unfair and unaffordable ground rents in older leases.
• The leasehold flat ban will apply to the purchase of residential homes. There may be some limited exemptions where leasehold may still be appropriate and this is the subject of consultation.
• The Moving to Commonhold consultation has also been launched today to seek views on the detail of the ban so that there is a smooth transition to commonhold, considering when the ban should commence and the case for any exemptions so as to protect the delivery of new much needed supply.