Ground rents for leaseholders in England and Wales are set to be capped at £250 a year as the government also proposes to ban new leasehold flats.
Existing leaseholders would gain the right to convert to commonhold under the consultation plans.
Announcing the cap in a video posted on TikTok, 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.
“And I’ve spoken to so many people who say this will make a difference to them of hundreds of pounds.
“That’s really important because the cost of living is the single most important thing across the country.
“So this is a promise that we said we’d deliver and I’m really pleased that we’re delivering on that promise.”
The announcement marks the first time a British prime minister has made a major government policy statement via TikTok.
STRONGER CONTROL
The government says over five million leaseholders and future homeowners will benefit from stronger control, powers and protections, through the draft Commonhold and Leasehold Reform Bill published today (Tuesday 27 January), which will fundamentally rewire homeownership across England and Wales.
It will cap ground rent at £250 a year before ultimately reducing it to a peppercorn after 40 years – marking the end of residential leaseholders paying over the top bills for no clear service in return.
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.”
JUST A PROPOSAL, NOT LAW
Paula Higgins, chief executive of the HomeOwners Alliance, said: “We have consistently called for ground rents to be abolished and reduced to a peppercorn, because homeowners should not have to pay for the ground under the home they own.
“We are very pleased the government’s draft Bill promises to cap ground rents to £250 and eventually peppercorn for leaseholders and put an end to the outrageous practise of escalating ground rents.
“The financial sector should allow these reforms to go unchallenged.”
“But flat owners should be aware it is a proposal, not yet the law, and there are still significant hurdles to clear before these changes take effect.
“After years of delay, the financial sector and vested interests should now step aside and allow these reforms to go unchallenged. Time has been called on treating homeowners as a lucrative income stream.”
STRUGGLE TO SELL
Timothy Douglas, head of policy and campaigns at Propertymark, added: “We know from our research that leasehold properties with escalating ground rent will struggle to sell, even if priced correctly.
“Addressing ground rents for existing leaseholders is a key step towards a fairer leasehold system.
“It brings existing leaseholders on par with new leaseholders, and it tackles one of the largest barriers to selling leasehold properties.”
VITAL OPPORTUNITY
And he added: “We also welcome steps to make it easier and cheaper to buy leasehold property and the ambition to transition towards commonhold, but agents and consumers will need clear guidance, education, and practical support to understand and navigate this change.
“A draft Bill provides a vital opportunity for policymakers to work with the sector to get the reforms right before legislation is passed into law. It is vital that the changes come in as soon as possible to support property transactions and that the costs are reduced for consumers.”
