PM confirms ground rent cap of £250 a year

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Millions of leaseholders across England and Wales are set to benefit from a major shake-up of the outdated leasehold system – with ground rents set to be capped at £250 a year, changing to a peppercorn cap after 40 years.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 Common-hold and Leasehold Reform Bill published today (Tuesday 27th January), which will fundamentally rewire home ownership 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.