Ground rents will be capped at £250 a year as part of a major series of reforms to the leasehold system.
Ground rents – an annual fee paid to the freeholder for the right occupy the land – will be capped at £250, changing to a peppercorn cap after 40 years.
Almost five million people nationally live in leasehold properties. In London 36 per cent of households live in a leasehold property – the highest proportion anywhere in the country.
The reduction of ground rents forms part of a wider raft of measures, including a ban on the sale of new leasehold properties and a new right for leaseholders to convert to commonhold.
Forfeiture, where leaseholders can lose their home and the equity they built up by defaulting on a debt as low as £350, will also be abolished and replaced with a new enforcement regime.
In a video on TikTok making the announcement, Prime Minister Keir Starmer said: “Good news for homeowners, we’re capping ground rent at £250. That means if you are a leaseholder, and your ground rent is more than £250, you’ll be paying less.”
Secretary of State for Housing 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.”
The draft of the Leasehold Reform bill is moving into pre-legislative scrutiny. Depending on parliamentary timings the cap on ground rents could come into force in late 2028.
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Bermondsey-based leasehold campaigner Francesco Guerrierri welcomed the ground rent cap which he said was a “start” but that the changes needed to go “much further”.
He added: “The frustration from leaseholders like me is palpable across Southwark and the country – there are around five million leaseholders in the UK trapped with extortionate charges that go up every year, poor service, and a fundamental lack of control over their own home.
“It’s deeply disappointing to see piecemeal tinkering from Labour instead of the urgent overhaul we desperately need.”
The Southwark Liberal Democrats have called on the government to abolish all ground rents on existing leases, cap service and management charges, and abolish leasehold altogether.
Southwark Liberal Democrat deputy group leader Cllr Rachel Bentley said: “The announced cap on ground rents will come as welcome relief to leaseholders – but these changes are far too timid in the face of the feudal system leaseholders find themselves trapped in.
“This lack of action is unsurprising given how our local Labour council treat their own leaseholders!
“Liberal Democrats are fighting hard to go much further to make sure that everyone has a home they have control over and can afford.”
