Ground Rent Reform: The Latest Reform of the Leasehold System

The leasehold system is making headlines again, and for once, it seems there’s genuinely good news.

The government has announced that, as part of its plan for the wholesale reform of leasehold, it will cap ground rents.

From 2028, ground rents will be capped at a maximum of £250 per year. And after 40 years (a painfully slow process), that cap will be reduced to no more than a few pounds annually.

This announcement forms a central part of the wider ground rent reform agenda, raising the big question many homeowners are asking: when will ground rent be abolished altogether?

This is just the latest of a series of measures aimed at eventually abolishing leasehold and replacing it with a tenure called commonhold.

If you’re confused by this most complicated of property issues, here’s a brief guide to what the whole subject involves.

What is ground rent?

If you’re the owner of a leasehold property or looking at buying one, then it’s good to know what ground rent is. Ground rent is not the same as rent. It is an annual fee that you pay to the landlord or freeholder. In essence, it is a form of rent for the land on which your home is built.

Your solicitor will review your lease agreement as part of the conveyancing process when you buy a leasehold property. This outlines the terms and conditions of your leasehold and will include details about the ground rent. Such as the amount to be paid, the payment frequency, and how it can be increased over time.

How leasehold came about

People often say the leasehold system is medieval or feudal, and that, quite literally, is correct.

It dates back to the Middle Ages, when all land was owned by the monarchy and ‘leased’ to individuals in exchange for services or fees.

Fast forward to today, and leasehold has become a system where you buy a property. Typically a flat, for a specific lease period, usually from 99 to 999 years.

But you do not own the land on which the flat is built.

That’s owned by a freeholder, entitled to charge ground rent. And, sometimes, charges for communal services are provided to your flat and others in the block.

More controversially, the leasehold system means that once the lease expires, or if you default on ground rent, the building could revert back to the freeholder.

Leasehold controversies today

Anyone buying a property with a lease with a reduced duration. Say, a 99-year lease which has only 80 or 70 years left can find it difficult to secure a mortgage. This is because lenders are cautious and want the maximum lease duration.

An existing leaseholder whose lease has run down is expected to bargain with the freeholder to extend it back to its maximum. This can be expensive and long-winded, and sometimes acrimonious.

Predictably, there have been many cases where leaseholders have accused freeholders of excessive ground rents and service charges.

To cap it all, some developers have taken advantage of the situation. And, in recent years, have even built brand new leasehold houses. Yes, houses and not just flats.

Some young or inexperienced buyers, unaware of the implications, have then complained that they have been ‘stung’ by spiralling ground rents and charges.

These concerns are exactly why the Leasehold Reform existing leaseholders agenda now focuses heavily on ground rent existing leases, not just new homes.

Overall, there’s broad agreement that the current leasehold system has serious issues.

Is Commonhold a serious alternative?

The draft Commonhold and Leasehold Reform Bill, currently before Parliament, aims to ultimately replace leasehold with commonhold.

This means that a flat buyer would own their property and land outright, without a time limit, and along with other owners would form a commonhold association.

This association would be responsible for arranging communal services and for agreeing on costs to individual flat owners.

In simple terms, this would allow existing leaseholders to convert or switch to commonhold. Removing ground rent entirely and giving residents far greater control.

The reforms as a whole

The government pledges:

• a ban on new-build leasehold flats. Instead they will be commonhold;
• the ground rent cap;

– making it cheaper and easier for some existing leaseholders to extend a lease;

• the abolition of forfeiture (where even for existing leaseholders, they will not have to forfeit their homes if they default on ground rents or if their leases expire);
• alternative enforcement, to ensure leaseholders still pay their fair share, but without the threat of losing their homes in the last resort.

Taken together, these measures form the backbone of the leasehold and freehold reform program set out in the Leasehold and Freehold Reform Act 2024.

The timescale

Here’s the problem: there is no firm timescale. Aside from the ground rent cap, even that will take 40 years to be fully implemented.

The task is immense.

There are 4.83m leasehold properties in England alone. Converting one to Commonhold requires consent from the existing leaseholders, freeholders and mortgage lenders.

The government is also expecting legal challenges from freeholders over how lease extensions are valued in future.

Meanwhile, the conveyancing industry, which has become expert at leases, now has to get to grips with the Commonhold system.   

For a small but still significant number of leaseholders, owning flats in tower blocks, there are likely to be building safety issues too. These leaseholders will not have to pay remediation costs. But until the work is completed by developers, it may be difficult to sell the affected properties.

So, while there’s genuinely good news on rent caps, this doesn’t mean that the leasehold system will disappear completely anytime soon.

The system, which has been around since the Middle Ages, still has some years left to run.

Key aspects of ground rent reform

Key aspects of the reform ground rent act include a cap on existing leases. A long-term peppercorn transition, and a new build ban on leasehold flats.

Cap on existing leases

From 2028, the ground rent cap of £250 (or £250 a year) will apply to qualifying existing leases. Offering long-awaited financial relief to homeowners who have seen charges escalate over time.

What is Peppercorn groundrent?

Peppercorn groundrent is a nominal charge, effectively zero, that cannot increase. While already in place for most new leases under the Ground Rent Act 2022, existing leases will only move to this level gradually under the current proposals.

Peppercorn transition

This slow reduction towards a peppercorn rate is why many campaigners argue that the timing/timeline is still far too long for meaningful change.

Impact on buyers and homeowners

Financial relief

For many leaseholders, a cap on ground rent could help them avoid problems that start surprisingly small.

Ground rent is a legal payment written into your lease. If it isn’t paid, it becomes a debt. Even a few hundred pounds can quickly grow once late fees, admin charges and legal costs are added.

The £350 figure isn’t a yearly charge or a typical bill. It’s an example of how a relatively small amount of unpaid ground rent can trigger enforcement action. For instance, someone might miss several smaller payments. Or fall behind over time, and once fees are added, the total owed can reach around £350. At that point, the freeholder may be allowed to take formal legal steps to recover the money.

This is why ground rent worries so many homeowners. It’s not the size of the payment alone, but the consequences of falling behind. Especially during periods of financial pressure.

The proposed ground rent cap offers reassurance for existing leaseholders who bought their homes in good faith, only to find their ground rent rising faster than expected. By limiting how high ground rent can go, the reforms aim to reduce the risk of small debts turning into stressful and costly legal disputes.

Should I buy a flat with ground rent over £250?

This is a common worry, especially if you’ve found a flat or house you love and then noticed it comes with ground rent. Having ground rent isn’t automatically “bad”, but it does deserve careful attention.

When people talk about “ground rent over £250”, they’re referring to a key mortgage issue. In England and Wales, if ground rent exceeds £250 a year (or £1,000 in London), some lenders treat the lease as a higher risk. This is because, in extreme cases, unpaid ground rent could technically lead to legal action by the freeholder.

That doesn’t mean you need to avoid the property altogether. But it does mean you should:

• Check how much the ground rent is now and how often it increases
• Ask whether the seller has already negotiated a reduction or lease extension
• Confirm early on that your mortgage lender is comfortable with the lease terms

With reforms on the way, many buyers are understandably asking whether this will “stop mattering soon”. The honest answer is that changes are coming, but they won’t apply overnight. Until the new rules are fully in force, lenders will continue to assess leases under the current criteria.

If you’re buying, a qualified conveyancer can explain the lease in plain English and flag any risks before you commit. If you’re selling a leasehold home with higher ground rent, speaking to an experienced local agent can help you price and position the property realistically and explain the upcoming reforms to buyers with confidence. We can help point you in the right direction for both.

The key takeaway? Don’t panic, but don’t ignore it either. Ground rent is just one part of the picture, and with the right advice, many buyers and sellers can still move forward safely and confidently.

Future policy and what happens next

Future policy will determine when ground rent will be abolished for existing leases, with many watching closely to see whether further amendments are made before or after 27 January 2026, a date expected to be significant for implementation milestones.

A key unanswered question remains: the Leasehold and Freehold Reform Bill, when will it become law in full, and how quickly will changes be enforced?

FAQs Ground Rent Reform

Is ground rent going to be abolished?

Eventually, yes. The long-term goal of leasehold reform ground rent policy is abolition, but current plans rely on a gradual transition rather than an immediate ban.

Do I still have to pay ground rent?

Yes, if you’re on an existing lease.

Is ground rent illegal in the UK?
No, ground rent is not illegal in the UK for older leases, despite reforms. The Ground Rent Act 2022 banned ground rent on most new leases, but existing leases are still legally required to pay it.

How much can my ground rent be increased?

This depends on the terms of your lease, but future increases will be restricted by the ground rent reform existing leases framework.

When will ground rent be abolished for existing leases?

There is no fixed date yet, which is why this remains one of the most controversial parts of leasehold and freehold reform.

If you want to stay on top of changes to ground rent, leasehold reform, and the future of commonhold, sign up for the Move iQ newsletter for clear, expert updates without the jargon.

Last Updated: February 9th, 2026