Leasehold Reform Update January 2026: What the New Ground Rent Cap Means for Leaseholders
Tuesday, 27th January 2026
Architecture | Leasehold Valuations
The government has now published its draft Leasehold and Commonhold Reform Bill, signalling a major shift in the way leasehold properties in England and Wales are structured. Central to the proposals is a cap on ground rents — set at £250 per year — alongside a wider package of reforms designed to give homeowners more control and improve fairness in the system.
For many leaseholders, ground rent has long been a contentious issue. While it doesn’t pay for a service, it can escalate sharply under clauses that allow it to double at set intervals or increase in line with inflation. These rises often deter lenders and buyers, limiting the marketability of affected homes. The proposed cap aims to ease this burden, with ministers suggesting it could save some households significant sums each year when it comes to extending their lease or acquiring their freehold.
This blog focuses on general advice, but there is no replacement for speaking to one of our experts, so please either phone or email us and we will be happy to assist.
Key elements of the draft reforms
The £250 Ground Rent Cap
The bill proposes an immediate ceiling on annual ground rent for existing leaseholders. This represents a significant shift for those currently facing steep escalations.
Phasing Out to a Peppercorn
Over a 40‑year period, ground rents are expected to fall to a nominal peppercorn — effectively zero — bringing older leaseholds in line with new-build homes, which have been free from ground rents since 2022.
Abolition of Forfeiture
The bill proposes removing the ability for freeholders to seize a property — and the leaseholder’s equity — over small debts. Currently, arrears as low as £350 can result in forfeiture. Ending this practice would provide far greater security for leaseholders.
Support for Commonhold
The reforms aim to simplify the process for converting existing buildings to commonhold. Under this model, homeowners collectively own the building and land, removing the concept of a diminishing lease entirely.
Why these changes matter
Many of the current issues stem from a system that hasn’t kept pace with modern home ownership. Leaseholders often face:
- Rising ground rents that can render homes unmortgageable
- A lack of control compared with freehold owners
- The risk of forfeiture over minor disputes
- Difficulty selling where leases contain onerous clauses
The proposed changes seek to address these imbalances and create a more transparent, equitable system — something campaigners and professionals have been calling for over many years.
What happens next?
The draft bill will now be examined by MPs on the Housing Committee before progressing through Parliament. The government has indicated that, if passed, the ground rent cap could come into force in late 2028. As always, the detail will matter, particularly around how existing leases will transition to the new system.
What This Means for You as a Leaseholder
The proposed reforms are an encouraging step towards a fairer system, but they will not affect all leaseholders in the same way. As the bill moves through Parliament and with the ground rent cap not expected until late 2028, it’s important to understand how these changes may — or may not — apply to your own situation.
If your ground rent is above £250
You stand to benefit the most from the proposed cap. Many leaseholders currently face ground rents that double or increase at fixed intervals, making their homes harder to sell or remortgage. The cap should provide meaningful financial relief and greater certainty over future affordability.
However, you may still need to make decisions in the short term. Because the reforms are not yet law — and could still change — waiting may not be the right approach for everyone. If your lease is already becoming difficult to sell or affecting your mortgage options, seeking early advice is strongly recommended.
If your ground rent is below £250
You may be largely unaffected by this particular reform. Your rent will not reduce under the proposed cap.
That said:
- You could still benefit in the very long term from the planned move to a peppercorn rent over 40 years.
- You may also benefit from the wider reforms, such as the proposal to abolish forfeiture — which currently allows freeholders to take back a property over debts as low as £350.
Even if the financial impact is minimal, understanding your lease terms remains essential, especially if you are considering extending your lease or planning a sale.
If you are thinking about a lease extension or freehold purchase
The reforms may influence your strategy, but they should not replace sound decision‑making based on today’s legislation.
Key considerations include:
- the current length of your lease
- whether your ground rent terms are already affecting value or mortgageability
- your intended timeline for moving or refinancing
Many clients will still find it sensible to progress with a lease extension now rather than wait for reforms that may not materialise for several years.
Our advice to leaseholders
Every lease is different, and the impact of the reforms will vary widely. As these proposals move through Parliament, leaseholders should:
- review their ground rent terms carefully
- understand whether they fall above or below the proposed £250 threshold
- consider their plans over the next few years
- seek tailored professional advice before deciding whether to wait or act now
We’re here to help you navigate these changes with clarity and confidence, and to ensure you make decisions that support your long‑term interests as a homeowner. If you are in need of some personalised advice, either phone or email us and we will be happy to help.
