The government has announced major changes to the leasehold system, introducing a cap on ground rents at £250 per year. Over time, this will reduce further to a peppercorn level after 40 years, marking a significant shift in how leaseholders are charged.
Alongside this reform, the government has confirmed that new leasehold flats will be banned. A public consultation on this proposal has now been launched, giving developers, homeowners and industry experts the chance to share their views.
These measures form part of the draft Commonhold and Leasehold Reform Bill, which was published today. According to the government, the changes are expected to benefit more than five million existing leaseholders and future homeowners across England and Wales.
The proposed cap on ground rent aims to end what many consider unfair charges that provide no clear service in return. For years, leaseholders have faced rising costs simply for owning their homes, with little explanation of how those payments are used.
By setting a limit of £250 a year and later reducing it to a peppercorn amount, ministers say they are putting an end to excessive fees that have placed financial pressure on homeowners.
Government estimates suggest that some leaseholders could save as much as £4,000 over the lifetime of their lease once the reforms take effect.
These changes are also expected to make it easier for leaseholders to sell their properties. In many cases, high or complex ground rent terms have made homes difficult to mortgage or unattractive to buyers, leaving owners stuck and unable to move.
Another key reform involves the abolition of forfeiture. Under current rules, leaseholders can lose their home and any equity built up if they fail to pay debts as low as £350.
The government plans to replace forfeiture with a new enforcement system that is fairer and more proportionate, offering greater protection to homeowners who fall into financial difficulty.
In addition, a new and improved process will be introduced to help existing leaseholders switch to commonhold ownership more easily.
The revamped commonhold model is designed to work across different types of buildings, including large developments, while also meeting the needs of mortgage lenders.
Under this system, residents will have stronger rights over how their building is managed, including decisions on repairs, leadership and budgets.
Homeowners living in commonhold properties will be able to vote on annual spending and have a direct say in how their building is run. New safeguards will also be introduced to protect residents when management problems arise.
Current leaseholders will be given the opportunity to move to commonhold where a majority of residents support the change, making ownership more transparent and democratic.
Political pressure has played a role in pushing these reforms forward. Last week, former Labour minister Justin Madders warned the BBC that the Prime Minister could face strong opposition if the government dropped its promise to cap ground rents.
He said his preferred outcome would be a peppercorn cap immediately, but acknowledged that a £250 limit may be more practical due to the risk of lengthy legal challenges.
Overall, the reforms represent one of the biggest shake-ups of the leasehold system in decades, aiming to give homeowners more control, fairer costs and greater security in their properties.
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