## Government Proposes £250 Cap on Ground Rents and Leasehold Reform

The UK government has unveiled proposals to cap ground rents on existing leasehold properties at £250 annually, with a plan to reduce these to a peppercorn rent after 40 years, effectively eliminating ground rent payments. Additionally, new leasehold flats will be banned, and a draft Commonhold and Leasehold Reform Bill is expected to be published soon. These reforms aim to address long-standing issues in the leasehold system, which have often hindered property sales and created financial burdens for leaseholders and landlords.

## Industry Experts See the £250 Cap as a Positive Step

Jo Darbyshire, co-founder of the National Leasehold Campaign (NLC), described the ground rent cap as a significant improvement, particularly for those who purchased new build properties over the past two decades with punitive ground rents. She noted, “The £250 cap will make a difference. Particularly for people who bought new build properties in the last 20 years with punitive ground rents. And let’s remember that ground rent is a charge for no service. It’s money for nothing.” However, Darbyshire also expressed concern that the 40-year wait before ground rents reduce to a peppercorn is too long.

## Addressing Barriers to Selling Leasehold Properties

Timothy Douglas, head of policy and campaigns at Propertymark, welcomed the government’s announcement, emphasising the impact escalating ground rents have on the marketability of leasehold properties. “We know from our research with Propertymark member agents that leasehold properties with escalating ground rent will struggle to sell, even if priced correctly,” he said. Douglas highlighted that capping ground rents is a key step towards a fairer leasehold system, helping existing leaseholders and removing one of the largest barriers to selling leasehold homes.

## Simplifying Transition to Commonhold

The reforms also include a new process to facilitate existing leaseholders converting their properties to commonhold tenure. Douglas stressed the importance of clear guidance for agents and consumers to navigate these changes effectively. “Agents and consumers will need clear guidance, education, and practical support to understand and navigate this change,” he said. He urged that the draft bill should be scrutinised carefully and that the reforms be implemented promptly to support property transactions and reduce costs for consumers.

## Landlords Welcome Ground Rent Cap Amid Rising Costs

Tom Goodman, managing director of Goodlord Platform, welcomed the ground rent cap as a relief for landlords owning leasehold properties, who are currently facing rising costs. He explained, “Escalating ground rents penalised this class of landlord and created an additional incentive for them to sell up – something the market can ill-afford against the current backdrop of supply and demand challenges.” Goodman views the cap as a timely regulatory measure that may encourage landlords to remain in the private rented sector.

## Commonhold Reform: Not a Complete Solution

Caroline Wild, Counsel specialising in Real Estate Disputes at Forsters law firm, cautioned that while commonhold reform is a welcome development, it may not fully resolve the issues faced by leaseholders. She explained, “Commonhold is still a form of communal living and a lot of the challenges leaseholders face under the current system will persist under a new tenure.” Wild advocates for a phased introduction of commonhold, beginning with new developments to allow the market and stakeholders to adapt gradually. She also emphasised the need for upskilling professionals and educating leaseholders about the rights and responsibilities under commonhold.

## Draft Legislation Awaits Scrutiny

Mark Chick, director of the Association of Leasehold Enfranchisement Practitioners (ALEP) and Senior Partner at Bishop & Sewell LLP, highlighted the importance of thorough scrutiny of the draft Commonhold and Leasehold Reform Bill. He remarked, “This draft legislation is long-awaited, both by the industry and by the five million plus leaseholders in England and Wales.” Chick stressed that reforms must be practical, evidence-based, and developed in partnership with professionals responsible for implementation. He also noted that while there is political pressure to accelerate change, careful attention to detail is essential to avoid rushed legislation that lacks clarity.

## Enhancing Homeowner Control and Property Management

Andrew Bulmer, chief executive of The Property Institute (TPI), welcomed the reforms for empowering homeowners with greater control over their estates and communities, alongside reducing high ground rents. He pointed out that commonhold will bring new responsibilities for homeowners, including building safety and financial governance. Bulmer emphasised the importance of a professional and regulated property management sector to support commonholders and leaseholders alike. He also called for government action on mandatory qualifications and regulation of managing agents to improve outcomes for homeowners.

## What This Means for UK Landlords

For landlords, the ground rent cap offers financial relief and may reduce the incentive to sell leasehold properties due to escalating ground rents. The reforms promise a fairer leasehold system, potentially improving marketability and reducing transaction barriers. However, landlords should prepare for changes in property management practices as commonhold tenure expands and new responsibilities for homeowners emerge. Staying informed and seeking guidance will be crucial as these reforms progress.