Government Announces Major Reforms to Leasehold and Commonhold Ownership

Ground rent cap

The government has today announced that leaseholders will benefit from the introduction of a cap on ground rent at £250 per year. This cap will be reduced to zero after 40 years, regardless of the lease terms. This move is designed to provide greater financial certainty and long-term relief to leaseholders.

Key proposals in the draft Commonhold and Leasehold Reform Bill

This ground rent cap forms part of a wider package of reforms included in the draft Commonhold and Leasehold Reform Bill, published today, Tuesday, 27 January. The bill aims to fundamentally reshape home ownership in England and Wales by:

• banning the creation of new leasehold flats
• strengthening the rights of homeowners, giving them increased control over their properties
• ending what has often been referred to as the “feudal” leasehold system.

Benefits for homeowners and leaseholders

Homeowners and leaseholders stand to benefit significantly from these reforms. In addition to the ground rent cap, the proposals include:

• the abolition of forfeiture, removing the current draconian risk of a leaseholder losing their home for minor lease breaches
• the introduction of a new enforcement regime aimed at correcting the current imbalance that favours landlords

Easier transition to commonhold

A new process will be established to make it easier for existing leaseholders to convert to commonhold ownership. Under the new commonhold model, homeowners will have an ownership stake in their buildings and a stronger say in management matters and associated costs.

Building on previous legislation

These current reforms build upon the Leasehold and Freehold Reform Act 2024, which was enacted with a particular focus on:

• making it easier and cheaper for leaseholders to purchase the freehold of their buildings or extend their leases
• increasing transparency regarding service charges and enabling leaseholders to hold landlords accountable.

Consultation and next steps

The government has committed to an extensive consultation process following the publication of the draft bill. Several specific consultation tracks have been announced to refine the legislation before it is formally introduced to Parliament.

These include:

• Banning new leasehold flats

Alongside the bill’s publication, the government has launched the “Moving to Commonhold” consultation, focusing on the technical details of the proposed ban.

• Pre-legislative scrutiny

The draft bill will undergo a period of broad consultation and parliamentary review, allowing stakeholders and the public to examine and comment on the proposed changes before the final version is presented to Parliament, currently expected in 2027.

• Valuation rates

There will be a specific consultation on valuation rates used for calculating premiums in lease extension and freehold acquisition claims.

• Ground rent Implementation

Although the bill proposes the £250 annual cap, the final details of how this will be implemented will be shaped by consultation responses and scrutiny during the drafting stage.

These new consultation processes build upon previous efforts, including a consultation that closed in September 2025, which focused on service charge transparency and the regulation of managing agents.

The changes may still be some way off as the legislative process continues.