Government finally sets ground rent cap at £250
Sir Keir Starmer makes announcement on leasehold reforms on TikTok as party tensions rise over delays.
Ground rents for leaseholders in England and Wales will be capped at £250 a year under a “game-changing” overhaul of the leasehold system, with Keir Starmer moving to deliver long-promised reforms after growing pressure from Labour MPs to show tangible progress.
Starmer announced the cap in a video posted on TikTok – the first time a UK prime minister has used the platform to unveil a major government policy.
“Good news for homeowners, we’re capping ground rent at £250,” he said. “That means if you are a leaseholder, and your ground rent is more than £250, you’ll be paying less.
I’ve spoken to so many people who say this will make a difference to them of hundreds of pounds.”
“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.”
The cap is part of the draft Commonhold and Leasehold Reform Bill published by the Ministry of Housing, Communities and Local Government, which ministers say will “fundamentally rewire” home ownership across England and Wales.
Reducing to peppercorn
Ground rents will be capped at £250 before ultimately reducing to a peppercorn after 40 years, ending what the department describes as “over the top bills for no clear service in return”.
Housing secretary 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.”
Ministers insist the ground rent cap is only the first visible step, with further leasehold reforms – including changes to commonhold and forfeiture – expected to follow in stages over the rest of this Parliament.
Industry reacts
“Ground rent has been a persistent friction point for buyers.”
Becky Fatemi, Executive Partner at Sotheby’s International Realty UK, comments: “Ground rent was introduced centuries ago as part of a feudal system, and in a modern housing market it has long since outlived its purpose. This is a genuinely sensible move and one the market has needed for a long time.
“Ground rent has been a persistent friction point for buyers, particularly international ones, who simply don’t understand why they are paying an ongoing charge for the ground beneath their own home.
transparency and consistency
“A clear cap brings transparency and consistency, which are critical in a market where confidence has been fragile. It also helps correct the imbalance between newer homes with no ground rent and older flats that have unfairly carried the burden.
“For buyers, it removes a lingering question mark over future costs. For sellers, it makes homes cleaner, clearer and more competitive.”
Nina Harrison, buying agent at Haringtons UK, comments: “Capping ground rent at £250 is a very positive thing for buyers. For many, the fear has always been that a cost which already feels unfair could creep up over time like a runaway train, putting them off leasehold flats altogether.
“A clear cap takes that anxiety away and gives buyers far more confidence about what owning the flat will actually cost in the long term. It also helps level the playing field between newer apartments built after 2022, where ground rents were scrapped entirely, and older flats that have felt at a disadvantage ever since.
archaic system
“That’s good news for sellers too, because predictable, capped costs make homes easier to explain, easier to mortgage and ultimately easier to sell.
“For too long, homeowners have been paying rent on the ground their own home sits on, an archaic system that feels increasingly out of step with modern home ownership.”
About time! Freeholders in general only exist to fleece leaseholders. They are only interested in squeezing as much money out of leaseholders regardless of how much misery and suffering they cause and in many cases their dodgy practices make apartments unsaleable.
No, Freeholders cannot just choose to increase leaseholders ground rents in the way you are suggesting. It’s all handled by very clear, perfectly-understandable contracts. Freeholders have a legitimate right to expect the income stated when they purchased the freehold (or retained ownership of it when they sold the lease).
I agree that there have been a few problems with property management companies charging hard-to-understand service costs, and of course ground rents that escalate by more than a fair rate, such as RPI inflation, should be banned. But why should a pension company that purchased a freehold with an inflation-proofed ground rent of, say, £500 a year be required to take a 50% cut, lose all index-linking, and then have their investment reduced to £0 in 40 years time? At the very least the Government should be compensating them for these losses, yet here they are offering no compensation and just stealing freeholders’ money!
The roof replacement is the biggest cost item that most leasehold owners will face. Most owners just keep “kicking the can down the road” hoping to have sold before it springs a leak.
We have had to return 5 differing blocks of flats as there is always at least one awkward leaseholder who objects. The legislation does not cover the problem of one awkward person (who is actually skint) from stopping the coalition of the willing from getting on with the job.
My office was built in 1893. We changed the roof to synthetic black slates in 2004, having planned and budgeted the work over the previous of 5 years, with the cooperation of the four leasehold flats above my office.
As with banning pets and children from rental property by omission in the legislation, this obvious ill is being ignored to grab a headline whilst not dealing with leaseholders who refuse to pay their share of maintenance costs.
And, of course, there is absolutely no financial compensation offered for the many holders of freeholds, both private and institutional, who will have valued and purchased these ground rents with the legitimate expectation of a continued and growing income.
This is straight theft by the Government. It will be challenged multiple times in court. Of course there are some examples of extremely bad practice by recent housebuilders and by managers of common facilities, over-charging and generally being opaque about where the property management fees are going, but this does not mean you destroy the financial basis for the entire freehold and ground rent market, and attack the many hundreds of thousands of freeholders who have done no harm to anyone. All of this was perfectly solvable without using the nuclear option of abolishing freehold and simply stealing the financial assets of freeholders.
There are going to be enormous fun and games in the future when the owners of commonhold flats agree amongst themselves to keep their annual costs as low as possible and not put money aside for general repairs, for replacing the roof or external render, or for upgrading their heating system and insulation to meet the Government’s future demands that everyone – not just residential landlords – will have to meet EPC Grade C. When there is no mechanism in poorly-drafted commonhold agreements to force flat owners to put money aside for these things, who will pay when the roof springs a leak?