UK Government Announces Ground Rent Cap and Leasehold Reforms

The UK government has set out new measures to cap ground rents and reform the leasehold system, aiming to address long-standing issues for leaseholders across England and Wales.

On 27 January 2026, the government published a press release detailing a proposed annual ground rent cap of £250 for existing leaseholders, which will reduce to a peppercorn rent after 40 years. The announcement was made by Prime Minister Keir Starmer through a video on TikTok, and Housing Secretary Steve Reed also commented on the planned changes.

The reforms include a ban on new leasehold flats and introduce a new right for current leaseholders to convert their properties to commonhold. The draft Commonhold and Leasehold Reform Bill was published on the same day, with the ground rent cap expected to be implemented by late 2028.

According to the government, these measures are designed to benefit more than five million leaseholders in England and Wales. The reforms also abolish forfeiture rules that previously allowed leaseholders to lose their homes over relatively small debts, such as those as low as £350, and introduce a new enforcement regime.

What the numbers show

• Ground rent cap set at £250 per year for existing leaseholders
• Cap will reduce to a peppercorn rent after 40 years
• Estimated savings for leaseholders exceed £4,000 over the course of a lease
• Between 770,000 and 900,000 leaseholders, especially in London and the South, are expected to see direct savings

The Competition and Markets Authority previously stated that ground rents are neither legally nor commercially necessary, supporting the case for statutory intervention. The Leasehold Reform (Ground Rent) Act 2022 had already abolished ground rents on most new long residential leases, setting them to a peppercorn rate, but did not apply to existing leases.

Earlier legislative efforts, such as the Leasehold and Freehold Reform Act 2024, did not include a cap on ground rents or a ban on new leasehold properties, despite previous proposals. The new reforms are intended to address these gaps by extending protections to existing leaseholders and restricting the creation of new leasehold flats.

Industry reaction

Chancellor Rachel Reeves and investor groups stated that the proposed cap could affect investor confidence and have implications for pension funds with investments in ground rent assets. These concerns have been raised in the context of the financial impact on stakeholders involved in ground rent portfolios.

The government has indicated that the reforms are expected to deliver savings to a substantial number of leaseholders, particularly those in London and the South, as part of its broader efforts to change the leasehold system.

* This article is based on publicly available information at the time of writing.