Ground rents to be capped at £250 a year for leaseholders
The UK government has published the Draft Commonhold and Leasehold Reform Bill, unveiling a major overhaul of property law in England and Wales.
Announced via TikTok on Tuesday, 27 January 2026, Prime Minister Sir Keir Starmer confirmed that ground rents for existing leaseholders will be capped at £250 a year. The move is designed to alleviate the "cost of living" burden and unlock the housing market for millions whose homes have become "unsellable" due to escalating fees.
Key Reforms in the 2026 Draft Bill 🏠
The legislation aims to "finally bring the feudal leasehold system to an end" through several specific measures:
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Ground Rent Cap: Existing ground rents will be capped at £250. After a 40-year transition period, these will be reduced to a "peppercorn" rate (effectively zero).
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Ban on New Leaseholds: The selling of most new leasehold flats will be prohibited. Instead, commonhold will become the default tenure, giving residents joint ownership of the building and land.
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Abolition of Forfeiture: The "draconian" 100-year-old law allowing freeholders to seize a property over debts as low as £350 will be scrapped and replaced with a fairer enforcement scheme.
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Conversion Rights: Existing leaseholders will be given a simplified legal route to convert their buildings to commonhold, provided a majority of residents agree.
Political and Economic Context ⚖️
The £250 cap represents a compromise following intense internal debate. While Housing Minister Matthew Pennycook and former Deputy PM Angela Rayner previously advocated for an immediate peppercorn cap, the government reportedly opted for the £250 limit to mitigate the risk of a "multi-billion pound" legal challenge from pension funds and institutional investors.
Steve Reed, the Housing Secretary, stated the reforms strike a balance between protecting leaseholders from "unreasonable increases" and ensuring the stability of the UK's "investment brand."
