Government Introduces Ground Rent Cap for Leaseholders

The UK government has announced a significant change to ground rents in England and Wales, capping them at £250 per year for leaseholders. This cap will apply to most residential leasehold agreements signed before July 2023, providing greater certainty for homeowners and landlords alike by preventing unexpected future increases in ground rent charges. After 40 years, ground rents will reduce to a peppercorn rent, effectively meaning no payment at all.

These measures form part of wider leasehold reforms outlined in the draft Leasehold and Commonhold Reform Bill, which was introduced on Tuesday, 27 January 2026. The reforms aim to address long-standing issues in the leasehold system that have caused financial and legal difficulties for leaseholders.

Ending New Leasehold Flats and Promoting Commonhold

A key element of the reforms is the prohibition on developers selling most new flats as leasehold properties. Instead, new apartment blocks will be constructed under a commonhold structure, where residents collectively own and manage the building and the land beneath it. This change is intended to give residents greater control and reduce disputes related to service charges and management.

The government is currently consulting on the practical implementation of this shift, including any limited exemptions and transition arrangements. This move will have implications for landlords and agents involved in new build developments, as the traditional leasehold model will no longer apply to most new flats.

Facilitating Conversion from Leasehold to Commonhold

Existing leaseholders are not excluded from these reforms. The government plans to make it easier for current flat owners to convert their properties from leasehold to commonhold if they choose. This conversion would grant them the same rights as buyers of new commonhold homes, potentially improving their control over management and costs.

Additionally, the government intends to end the practice of forfeiture for relatively small debts—a legal power that has historically allowed landlords to repossess properties over minor arrears. Instead, a court-led process with stricter safeguards will be introduced, applying only in more serious cases. This change offers greater protection to leaseholders and may influence how landlords manage arrears and enforcement.

Improving Transparency and Protecting Homeowners

The reforms include measures to enhance transparency around service charges and building costs. Bills will be clearer, and routes to challenge unfair fees will be strengthened. Landlords and managing agents will be held to higher standards, which should reduce unexplained increases in charges.

These changes will also extend to nearly two million households living in freehold homes on privately managed estates, where additional charges for shared spaces—often referred to as ‘fleecehold’—are common. The government aims to curb the future use of such charges and provide greater protection for homeowners.

Additional Leasehold Reform Measures

Other proposals include banning a century-old legal power that allows harsh penalties for missed payments and introducing standardised estate charge statements. These statements will enable tribunals to replace failing management firms, improving accountability and service quality.

There will also be a consultation on whether resident-run management should become the default arrangement, potentially giving residents more influence over how their estates are managed.

What This Means for Landlords and Agents

For landlords and letting agents, these reforms signal a shift in how leasehold properties are managed and sold. The cap on ground rents will limit income from this source, but the move towards commonhold may reduce disputes and improve management transparency. Agents involved in new developments will need to adapt to the commonhold model, while those managing existing leasehold properties should prepare for changes in arrears enforcement and service charge regulations.

Overall, these reforms aim to create a fairer and more transparent system for leaseholders and freeholders, with implications for property management and landlord responsibilities across England and Wales.

Suggested internal link anchors

• ground rents
• leasehold agreements
• commonhold structure
• leasehold reform
• service charges
• property management
• forfeiture rules
• estate charge statements
• leasehold conversion
• landlord responsibilities

TLA update

TLA is launching a new Trusted Partners Hub in Q1 2026, featuring verified and approved service providers selected to support landlords, tenants, and property management businesses. We are inviting legal, trades, insurance, financial, mortgage, tenant screening, and other service providers to register their interest here: https://landlordassociation.org.uk/become-a-tla-service-partner/