PM confirms ground rent cap of £250 a year

• PM caps ground rents at £250 a year in game-changing shake up of leasehold system and to support families with the cost of living.

• Over five million leaseholders to benefit from stronger rights and new leasehold flats to be banned – saving people money and giving them control over their home.

• Major moment marks beginning of the end for the feudal leasehold system that has tainted the dream of homeownership for so many. 

Millions of leaseholders across England and Wales are set to benefit from a major shake-up of the outdated leasehold system – with ground rents set to be capped at £250 a year, changing to a peppercorn cap after 40 years.  

Making the announcement in a video on TikTok this morning, Prime Minister Keir Starmer sets out how the cap will save some families hundreds of pounds as the cost of living is the single most important issue across the country. 

New leasehold flats will also be banned and homeownership strengthened thanks to groundbreaking legislation that will give people control over their homes and calls an end to the feudal leasehold system which dates to medieval times.  

Over 5 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. 

This move will ensure leaseholders keep more of their hard-earned cash, with many seeing savings of over £4,000 over the course of their lease, improving cost of living for millions. This will also unlock house sales for leaseholders whose lives have been put on hold because of ground rent terms that make their homes hard to sell.  

In a video on TikTok making the announcement, 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.” 

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.” 

Forfeiture, whereby leaseholders can lose their home and the equity they built up by defaulting on a debt as low as £350, will also be abolished and a new enforcement regime will rebalance the system – making it fairer between landlord and leaseholder.  

A new process to make it easier for existing leaseholders to convert to commonhold will also be introduced under a revamped commonhold model where  homeowners will receive a stake in the ownership of their buildings and be given a stronger say in the issues that affect them, with greater control over how the building is managed and the bills they pay.  

The reinvigorated commonhold system will ensure it works for all types of developments, as well as mortgage lenders, with strong management rules in place around repairs and leadership, and greater rights for homeowners. 

Those living in the building will have a say in the annual budget and how the building is run, and new protections when things go wrong. Current leaseholders will also be given the opportunity to switch to commonhold, where the majority of residents agree to it. 

The reforms build on action currently being undertaken by the government to implement the Leasehold and Freehold Reform Act 2024, including increased transparency over service charges so that leaseholders can better hold their landlords to account. 

This comes as the government passed through its landmark Renters' Rights Act, delivering the biggest boost to renters' security and protections in a generation – ending unfair ‘no fault' evictions, multiple rent hikes and bidding wars, and giving millions more stability and control over their homes. 

ENDS 

Notes to editors: 

• Full video can be found on the Prime Minister's TikTok account: @keirstarmer
• The draft Bill will now move into pre-legislative scrutiny, expected to be carried out by the HCLG Select Committee. Subject to parliamentary timings, the ground rent cap could come into force in late 2028.  
• We are committed to working with all stakeholders through the pre-legislative scrutiny process, noting further engagement on appropriate treatment of quid pro quo leases (where the purchase price was demonstrably lower as a result of a higher level of ground rents) but being clear this is not an open door for exemptions. 
• The Leasehold Reform (Ground Rent) Act 2022 already ended ground rents for most new long residential leases going forward; this announcement focuses on tackling unfair and unaffordable ground rents in older leases.  
• The leasehold flat ban will apply to the purchase of residential homes. There may be some limited exemptions where leasehold may still be appropriate and this is the subject of consultation.  
• The Moving to Commonhold consultation has also been launched today to seek views on the detail of the ban so that there is a smooth transition to commonhold, considering when the ban should commence and the case for any exemptions so as to protect the delivery of new much needed supply. 

Consumer explainer:

OWN A FLAT OR LOOKING TO BUY? Here's what the new leasehold shake-up means for you ? 

Millions of homeowners – mostly flat owners – will save significant cash thanks to a new major shake‑up of the leasehold system. 

If you own a flat or are looking to buy one, you probably know about the excessive charges you may have to pay on top of your mortgage and other bills. 

Ground rents are often inescapable because they have to be paid under the terms of your lease. Some landlords charge a substantial amount for no clear service in return. 

The Prime Minister has announced huge changes to put this to an end – a turning point for millions of homeowners whose lives are plagued by these charges. 

Here is what the government is doing to protect your pockets from unfair charges: 

1. Ground rent will be CAPPED – no more spiralling bills

Many flat owners pay ground rent that can shoot up a lot. You may not even realise that it is going to increase until you get the bill. Ground rent is a payment to the owner of the land your flat sits on. 

That's being stopped.  

• If you have a ground rent it will be capped at £250 a year.  

• And after 40 years it will be cut to a peppercorn, so nothing is paid. 

• This will apply to most residential leasehold contracts that were entered into before July 2023, meaning big savings and no nasty financial surprises. 

2. New leasehold flats will be banned

This is huge. In future, developers will no longer be allowed to sell new flats as leasehold (except in limited cases). 

 
Instead, new flats will be built as commonhold – meaning you own the ground your flat is built on and the overall building with your neighbours. 

This is a fairer system used widely in other countries, giving flat ownership a whole new meaning (because it's actually all yours!). 

The government is consulting on the details, including trickier cases where exemptions might be needed and timing arrangements to ensure the transition to commonhold is smooth.  

Moving to a commonhold system will mean: 

• You own your flat outright 

• You and your neighbours jointly own and run the building, you might hire a managing agent to look after the property, but they will be accountable to you 

• There's no landlord above you charging more than needed 

• You get a proper say over spending, repairs and local rules 

3. Existing leaseholders will get the right to switch to commonhold

If you already own a leasehold flat, you won't be left behind. The government will make it much easier for existing leaseholders to convert to commonhold, so they benefit too.  

4. You can't lose your home over tiny debts anymore

At the moment, some people can lose their home for owing as little as £350 in fees. 

 
This extreme rule called forfeiture will be scrapped.  

A new, fairer system will be introduced and replaced with a new court-led process with strict safeguards for more extreme cases. 

5. Service charges and building costs will be more transparent

These leasehold reforms build on changes already coming that will: 

• make service charge bills clearer and easier to understand 

• help people challenge unfair costs 

• force landlords and their managing agents to be more accountable 

• and reduce mystery fees or unexplained hikes. 

6. More power for freehold homeowners against excessive estate charges – a big crackdown on ‘fleecehold' estates 

If you own a freehold house on a privately managed estate (often new builds), you might still be paying extra fees for the upkeep of parks, roads and shared areas, even though you already pay council tax. 

 
This is often called ‘fleecehold' and nearly two million households are affected.  

We want to reduce the use of this approach going forwards, putting an end to its unjustified use for the majority of new homes.  

The government is also consulting on recently announced major reforms, meaning: 

❌ The harsh 100‑year‑old law used to punish homeowners will be banned 

Right now, missing a payment (even as low as £100) can mean losing access to your home or even having a lease slapped onto it. This draconian power will be scrapped.  

? Standard, clearer bills so you can challenge unfair charges 

Homeowners will get simple, standardised information about estate charges to help them spot unreasonable fees and challenge them. No more mystery bills or surprise add‑ons.  

? A new ‘substitute manager' if the current one fails 

If a management company isn't doing its job - for example, leaving roads unmaintained or green spaces neglected - a tribunal will be able to appoint a new manager to take over. This gives residents proper backing when things go wrong.  

?️ Government will look at making resident‑controlled management the default 

The government is exploring whether residents should run their estates themselves, instead of being forced to rely on a private management company with no accountability.