Britain’s government has moved to cap ground rents at £250 a year and overhaul its leasehold property system, a reform aimed at reducing long-standing costs for millions of homeowners and reshaping the real estate landscape in England and Wales. The measures, announced on 27 January 2026, fulfil a major 2024 election promise by Prime Minister Keir Starmer’s administration and seek to modernise an antiquated tenure structure that critics say has weighed on property transactions and affordability.
Under the draft Commonhold and Leasehold Reform Bill, ground rents on existing leases will be capped at £250 annually, with a planned phased reduction to a nominal “peppercorn” rent over 40 years. The government also proposes banning new leasehold flats in future developments and strengthening leaseholder rights such as facilitating transitions to commonhold ownership. Officials said the reforms would ease financial pressure for more than five million leaseholders and help unlock stalled home sales attributed to onerous ground-rent clauses.
The measures reflect a broader push to address systemic issues in the UK housing market. Ground rents, rooted in historical land law and once a common feature of British property tenure, have increasingly been seen as a barrier to mobility and mortgage approvals when levied at rising or unpredictable levels. By legislating a cap and eventual reduction, the government expects to reduce cost burdens and improve confidence among buyers and lenders.
However, the proposals have drawn criticism from some investors and freeholder groups who warn that retroactive caps on ground rent could unsettle existing contracts and undermine confidence in the property investment market. Major asset managers have flagged potential financial impacts and questioned the precedent set by altering long-standing terms embedded in leasehold agreements.
The unfolding reform introduces significant shifts in UK property law and market dynamics, but how the measures will interact with broader housing policy and investment sentiment remains an unresolved dimension as the Bill proceeds through consultation and legislative scrutiny.
