The government will introduce a £250 annual cap on residential ground rents in England and Wales by late 2027, a year earlier than previously planned, following pressure from MPs and parliamentary committees.
The accelerated timeline affects more than four million leaseholders who currently pay ground rents on their properties. The government had initially indicated the cap would be implemented by late 2028.
Parliamentary pressure
The decision follows a report by the Housing, Communities and Local Government Committee, which urged ministers to implement the reforms without undue delay. The committee questioned the need for further delays whilst a small number of possible exemptions were being considered.
Housing Minister Matthew Pennycook had previously told MPs there were “a number of remaining policy choices” to work through before the cap could be introduced. However, the committee stated that “the vast majority of leaseholders simply want to see the £250 cap on ground rents implemented without undue delay.”
Reform details
Under proposals in the forthcoming Commonhold and Leasehold Reform Bill, ground rents will be capped at £250 per year before reducing to a peppercorn rate after 40 years. Ministers are expected to reject calls to shorten the 40-year transition period, citing concerns that doing so could increase the risk of legal challenges from freeholders.
The draft Bill was published in January, and the final legislation is expected to be introduced before Parliament’s summer recess in July. The reforms follow recent changes to property taxation that have affected homebuyers across England and Wales.
Financial impact
A spokesperson for the Ministry of Housing, Communities and Local Government said the reforms would save leaseholders thousands of pounds over the course of their leases. The changes form part of broader housing policy reforms that also include proposed adjustments to mortgage regulations aimed at improving access to property ownership.
The accelerated implementation timeline represents a compromise between calls for immediate reform and concerns about potential legal challenges from property owners who derive income from ground rents.
