The Government has set out plans to overhaul the leasehold system in England and Wales, promising lower costs for future homeowners and a gradual move away from what it describes as an outdated, feudal model of home ownership. Central to the proposals is a cap on ground rents at £250 a year from 2028, with charges reducing to a peppercorn after 40 years.
The reforms are aimed primarily at new homes and conversions, rather than existing leases. Ministers say the approach balances consumer protection with respect for existing contractual arrangements and long-standing property investments.
Capped ground rents and new-build changes
Under the proposals, ground rents on new residential leases will be capped at £250 a year, addressing concerns about high and escalating charges that have left some leaseholders facing thousands of pounds in payments over the life of a lease. After 40 years, the ground rent would fall to a nominal, or “peppercorn” level.
Around 3.8 million leasehold properties across England and Wales currently carry a ground rent obligation, with leaseholders paying more than £600m each year. However, the new cap will not apply retrospectively. Existing leaseholders will not see their current ground rents reduced under these plans.
The Government has made clear it does not intend to ban landlords from granting new leases on existing leasehold flats where a previous lease has expired or been surrendered. This means the reforms will largely affect future developments rather than the current housing stock.
Ending leasehold for new flats
A wider change will see leasehold banned for most new flats, including new-build developments and certain conversions, such as houses converted into flats or buildings undergoing a change of use. Ministers say this marks the end of a system dating back to medieval times.
Prime Minister Keir Starmer has promoted the reforms as part of a broader effort to ease cost-of-living pressures. He said the cap on ground rent would save some families hundreds of pounds a year, framing the changes as “good news for homeowners”.
To avoid uncertainty in the housing market, new legislation will define clearly what counts as a “flat” for the purposes of the ban. The aim is to reduce ambiguity and prevent loopholes that could allow the continued use of leasehold where it is no longer intended.
Some exemptions will remain. Build-to-Rent schemes, social housing blocks and developments built exclusively for rental will not be affected. The ban will also apply only to residential property, leaving commercial developments outside its scope.
What it means for existing leaseholders
Although existing leaseholders will not benefit from the ground rent cap, the Government says they will not be “left behind”. Proposals include making it easier for leaseholders to buy their freehold or convert their building to commonhold.
A key change would reduce the consent threshold for conversion to commonhold from 100% of leaseholders to 50%. This would allow a majority of residents to take collective control of their building, gaining a direct stake in its ownership and greater influence over management and costs.
Housing secretary Steve Reed has also confirmed plans to abolish forfeiture, the process by which leaseholders can lose their homes for defaulting on relatively small debts. A new enforcement regime is intended to rebalance rights between landlords and leaseholders.
The proposals are set out in a consultation, Moving to commonhold: banning leasehold for new flats, which seeks views on timing, exemptions and how to ensure a smooth transition. Responses are invited until 24 April 2026.
While consumer groups have broadly welcomed the direction of travel, the level of the £250 cap has drawn criticism from parts of the property and investment sector, which argue it could damage a long-established asset class and affect pension values. The consultation process will now determine how far the Government is willing to adjust its plans.
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