Ground rents to be capped at £250 a year for leaseholders
As part of the UK government's efforts to make significant changes to home ownership, ground rents paid by leaseholders will be capted at £250 a year in England and Wales. The changes also include plans to prohibit the selling of new leasehold flats and give homeowners greater control over how their buildings are managed. Campaigners feared that the government would remove the cap on ground rents - an annual fee leaseholder must pay to their freeholder - in light of the potential effect on pension funds. However, Labour MPs, including former Housing Secretary Angela Rayner, had been urged by Labour's manifesto to combat "unregulated and unaffordable ground rent charges.
The changes have been included in a draft Leasehold and Commonhold Reform Bill, which has been published. Prime Minister Sir Keir Starmer said the cap in a TikTok video would save some leaseholders hundreds of pounds.
The cost of living is the single most important thing in the country,
finally bring the feudal leasehold system to an end. Around five million leasehold homes in England and Wales, where people have the right to occupy a house on a limited number of years from a freeholder. In 2022, ground rents for the majority of new residential leasehold homes in England and Wales were abolished, but existing leasehold dwellings remained unchanged. A lease is often written that the ground rent doubles or rises by RPI inflation at set intervals, making it impossible to sell or get a mortgage for a house. After 40 years, the government claims that ground rent would eventually be reduced to a peppercorn, effectively zero. Forfeiture, a mortgage repayment that low as £350 can be canceled, is where leaseholders can forfeit their house and the equity they earned as a result. The bill will also make it possible for current leaseholders to convert to commonhold, ensuring that occupants jointly own the property and the building without an expiring lease. MPs on the Housing Committee will now scrutinize the bill before it makes its way into Parliament, with the government claiming that the cap will be in force in late 2028.he said. Labour's 2024 election manifesto pledged to
Treasury officials had previously stated that there were questions regarding where to draw the line over annual ground rent charges. According to Housing Secretary Steve Reed, the government's reforms struck the right balance in a way that "protects people's pensions while still shields leaseholders from unreasonable increases.
Relief and scepticism
Phil Jones, 57, bought his two-bedroom leasehold flat in Westcliff-on-Sea, Essex, 25 years ago. Every ten years, his ground rent doubles every ten year and now costs less than £500 a year. He claims that this makes his flat unprofitable because mortgage companies will not lend on a house that has a doubling ground rent clause in its lease. He characterized the news as a massive relief
and said he should now think about selling his house. But he was hoping for ground rents to be capeted at a peppercorn rate, and said he'd be suspicious
that the freeholders would challenge the changes. Jade Kavanagh-Barnes said that her ground rent of more than £700 had made it impossible to sell her leasehold flat in Manchester. She and her husband moved to Kent, claiming they would have no problems selling the Manchester flat.
she said. Jade expressed her dissatisfaction with the government's leasehold reforms as aWe now have two mortgages, which was never the intention and impossible to maintain,
good step.Hopefully it will appease the freeholders and pension funds enough for them to not block it with litigation and appeals,
completely unjustifiedshe said. The Residential Freehold Association, which represents professional freeholders, said the charging of ground rent was
strateggle long-established contracts and property rights, which are the foundations of the UK's investment brand. Campaigners had called for a cap, claiming that rising ground rents had left leaseholders struggling to sell their houses. However, some wanted the government to go further and limit ground rent to a peppercorn rate, effectively zero.and warned about the effect on the UK's image as an investor. The bill, according to a spokesperson, would
If leaseholders are paying for nothing,Harry Scoffin, the founder of campaign group Free Leaseholders, said, not in 2068.
It's also encouraging that the government acknowledges that monetary ground rents must come to an end,The National Leasehold Campaign said that, although it was dissatisfied with the government's decision not to enforce immediate peppercorn ground rents, it applauded the cap.
Jo Darbyshire, the group's co-founder.However, 40 years is a lengthy time to wait for peppercorn ground rents.
subjected to furious lobbying from wealthy investorsMany leaseholders have also expressed dissatisfaction with high service charges, which they have no influence over and must pay for the care and maintenance of their buildings. According to the government, leasehold reforms will continue to improve service charge bills' clarity and help consumers tackle unfair charges. Leasehold represented 97 percent of flat sales in 2024 in England, according to an estimated. According to the English Housing Survey, leasehold owner-occupiers in 2023-24 reported paying an annual ground rent of £304 a year. When Labour was in opposition, new Housing Minister Matthew Pennycook said his preference was for ground rents to be cap at practically zero. Rayner said ministers were
obvious injusticetrying to downplay the pledge, and warned that if the party does not address the
mass rebellion. He said setting the limit at a peppercorn rate would be his preferred option, but that he would consider a £250 cap due to the "risk of a lengthy legal challenge. Get all the headlines you need to start the day with our flagship newsletter. Sign up here.with a cap, it would risk losing trust. And last week, former Labour minister Justin Madders told the BBC that if the government broke its pledge to cap ground rents, the prime minister could face a
