Government announces ground rent cap and ban on new leasehold flats

The government published the draft Commonhold and Leasehold Reform Bill on 27 January 2026, setting out plans to cap ground rents at £250 a year, ban the sale of new leasehold flats and make it easier for existing leaseholders to move to commonhold¹. The government says the bill will "fundamentally rewire homeownership across England and Wales"¹.

Under the proposals, ground rent, the fee paid by a leaseholder to the freeholder, would be capped at £250 a year, and after 40 years would change to a peppercorn cap, meaning very little or no ground rent is paid¹. The government says this means many leaseholders will save £4,000 or more over the course of their lease². Leasehold properties would not be fully outlawed, but new leasehold flats would be banned¹. The bill would also abolish forfeiture and replace it with a new enforcement regime; at present leaseholders can lose their home and the equity built up if they default on a debt as low as £350¹.

Commonhold was first introduced in England in 2002¹. Under commonhold, each homeowner in a building owns the freehold to their own property, and the common parts are owned and managed by a commonhold association made up of homeowners rather than a third-party management company¹. The bill would introduce a new process to make moving to commonhold easier¹.

The reforms build on the Leasehold and Freehold Reform Act 2024, which became law in May 2024¹. To date only 10 of the 125 sections of that Act have been passed, and the government says implementation requires approximately 25 to 30 pieces of secondary legislation². The 2024 Act's provisions include extending standard lease terms to 990 years, up from 50 years for houses and 90 years for flats, with ground rent reduced to zero². Only some measures are currently in force; others rely on secondary legislation and are expected to take longer to come into effect¹.

Why it matters for households

The ground rent cap would apply to leaseholders in England and Wales². It is not yet law: the government estimates the cap could come into force in late 2028, subject to Parliamentary timings¹. The bill now moves to pre-legislative scrutiny, so it could be several years before it receives Royal Assent¹. Leaseholder Action welcomed the announcement but said some would be disappointed that ground rents are not being eliminated immediately¹. Liam Spender, the lawyer behind the Leaseholder Action claim, said the cap "will make it cheaper for people to buy the freehold and to extend their leases, both of which are priced by reference to ground rent values"¹.

Mortgage lenders sometimes carry out additional checks or refuse to lend on leasehold properties with high ground rent, as high fees affect a property's value¹. The government hopes a cap will make it easier for potential borrowers to apply for a mortgage on leasehold properties and for owners to sell them¹. For anyone buying a leasehold property, the current rules on ground rent on new leases and on borrowing on a leasehold home remain in place until the proposals take effect. The difference between freehold and leasehold ownership is unchanged for now.

What happens next

The draft bill will go through pre-legislative scrutiny¹. The government estimates the ground rent cap could come into force in late 2028, subject to Parliamentary timings¹. A consultation on whether "quid pro quo" leases, where a higher ground rent is agreed for a corresponding reduction in purchase price, should be treated differently or exempt from the proposed cap closed on 21 October 2026². A consultation on lease extension valuation rates was extended to 21 October 2026². A Court of Appeal hearing on the freeholders' challenge to the 2024 Act is due in April 2027².