As many will now be aware, the current Labour Government has recently sought to revolutionise leasehold arrangements through a package of different measures and part of the rationale for this is to provide support for families enduring the cost of living crisis.
The most recent initiative comes through the Draft Commonhold and Leasehold Reform Bill which seeks to cap ground rent (an annual sum payable under long leases) at £250.00 a year and then changing to a peppercorn cap (potentially a nominal sum of typically £10.00) after a 40-year period.
Many of the residential leases which we have seen over the years in our capacity as conveyancers have involved a range of annual ground rents. With regard to leasehold properties where the landlord is a Borough Council, the ground rents are capped at a peppercorn in accordance with the Housing Act 1988 but, in the private sector, there is often a broad spectrum of ground rents which could feature in residential leases.
The annual figure in a private lease could for example, be an annual figure of £300 at the commencement of a lease for the next 20 years and then a doubling of that annual payable sum every 20 years throughout the duration of the lease or, at the potentially more expensive end, ground rents rising in line with inflation or doubling every 5, 10, 15 years for example.
It is therefore no surprise that this initiative was warmly welcomed by many across the leasehold spectrum as it seeks to eradicate some of the bias that was previously written into leases in favour of private landlords. To explain some of the historic background on this, leases were often treated in that regard as an investment vehicle for pension companies and other small or larger institutional investors.
The ground rent initiative has therefore been supported by a number of key stakeholders such as the Chief Executive of RICS, The Leasehold Advisory Service and The National Residential Landlords Association.
Sarah Cardell, Chief Executive of the CMA has said:
We have long supported a cap on ground rents to make sure all leaseholders get the fair deal they deserve. The CMA welcomes the government’s proposals so people won’t have to struggle against these rising fees anymore – particularly when many are already grappling with high costs elsewhere.
Additional measures, as part of the Leasehold Reform Bill which was published on Tuesday 27th January 2026, include new powers to create a commonhold arrangement for new flats/new builds. This measure is potentially consistent with the arrangement for blocks of flats in other continental systems and beyond. The idea behind such schemes is to provide greater power and responsibility to tenants within the block and strip away the long held bias within such arrangements that landlords previously held.
Specifically, this can relate to “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. [As per the Press Release PM: We’re capping ground rents at £ 250 published on 27 January 2026].
Current leaseholders will also be given the opportunity to switch to a commonhold, arrangement where the majority of residents agree to it.
Additional measures that will be provided potentially through the Leasehold Reform Bill 2028 include the following:
- A ban on the sale of new leasehold flats.
- Abolition of forfeiture. This is an age-old remedy that was available for landlords when tenants had defaulted/breached their lease with debts of as low as £350.00.
These reforms build on action currently being undertaken by the Government to implement the Leasehold and Freehold Reform Act 2024, which includes transparency over service charges so that leaseholders can better hold their landlords to account.
This tenant focused initiative also broadly aligns with other Government policy such as the Renters’ Rights Act which includes measures such as terminating no fault evictions, avoiding many rent hikes and bidding wars as well as “stability and control”.
It should also be noted, separately, that the Leasehold and Freehold Reform Act 2024 “increased the standard lease extension term to 999 years, with the ground rent reduced to a peppercorn upon payment of a premium”.
It also “made it cheaper and easier for leaseholders in houses and flats to extend their lease or buy their freehold including by removing the requirement to pay a marriage value”.
It is noted, however, as per the same UK Parliament House of Commons Library publication on 6th February 2026 that “although the LFRA 2024 has received Royal Assent, the majority of the provisions are not yet in force. Many will require further consultation on the details and secondary legislation to be commenced. The Labour government has committed to implement the Act as quickly as possible while recognising the significant complexity of the task and the importance of taking the necessary time to ensure that reforms are watertight”.
In that regard, it is interesting to also note an on-line article by Hugh Moorhead which was published on 4th February 2026 in The Investor Chronicle stating that there remains (predictably) strong opposition within the property sector to the proposed ground rent initiative (in particular, the capping of the ground rents at £250.00).
The article quotes that the Government estimates that between 770,000 and 900,000 leaseholders, around 1 in 6 of the 5.2 million in total will benefit from this measure but also refers to some of the key opposition to the draft Bill such as the potential reduction of available funds for building safety remediation on the “thousands of buildings required in wake of the Grenfell Tower fire”. In addition, the article lists significant private portfolio companies who estimate that the ground rent measure will reduce their capital funds significantly and in doing so, cause economic harm to the pensioners and other private interests who hold stakes in these corporations.
It is therefore remains to be seen whether the Government will be able to steer the current ground rent proposals through to the statute books. If they can indeed lead this measure and others through to fruition, it should firmly secure their policy direction of social and generational change on how leases are governed.
Richard Greenby, Partner
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