January’s announcement by the UK Government marks one of the most significant overhauls of the leasehold system in England and Wales in a generation.

With the introduction of the draft Leasehold and Commonhold Reform Bill, the government is taking direct aim at “spiralling” costs and outdated tenure structures.

The Ground Rent Cap

The headline change is a proposed £250 annual cap on ground rents for existing residential leaseholds.

• Target: Protecting the 770,000 to 900,000 leaseholders currently paying high or “doubling” rents.
• The Long Game: After 40 years, these capped rents will automatically drop to a “peppercorn” rate (£0).
• Timeline: Subject to parliamentary scrutiny, the cap is expected to take effect in late 2028.

Beyond the Cap: A Move to Commonhold

The reforms go much further than just ground rent:

• Ban on New Leasehold Flats: Commonhold will become the default tenure for all new builds.
• The Right to Convert: Existing leaseholders will have a clearer legal pathway to switch to commonhold.
• Abolition of Forfeiture: The “draconian” power to seize a property for debts as low as £350 will be replaced by a fairer, court-led process.
• Service Charge Transparency: New rules to make charges easier to understand and challenge.

The Impact

While this is a victory for many homeowners, the announcement hasn’t been without controversy. Freeholder groups have raised concerns regarding property rights and the impact on pension funds, with legal challenges likely on the horizon.

What do these changes mean for the property market? Whether you are a homeowner, developer, or investor, these reforms will fundamentally change the landscape of UK real estate.