The government intends to cap ground rents at £250 per year, which will then drop to a ‘peppercorn’ rate after 40 years.
As it stands 770,000 to 900,000 leaseholders pay over £250 per year, of which 490,000 to 590,000 are in London and the South.
The change will come into force in 2028.
The government said: “This will deliver a modernised, more efficient housing market and support our wider plan to end the feudal leasehold system.”
Angela Rayner has urged government to stand firm against landlords opposing the changes.
She previously told the House of Commons: “We know that vested interests have repeatedly resorted to lawfare to block such measures and may do so again.
“And we’ve already seen the scaremongering begin with outrageous claims that this will impact on life-saving building safety work.”
Robert Poole, director, block management, Glide Property Management, part of LRG, said: “Capping existing ground rents is a constructive step and will give many leaseholders more certainty, particularly where escalators and multipliers have caused problems.
“It helps settle one part of the cost picture and removes a source of unpredictability that has worried a lot of people.
“In reality, though, ground rent is only one part of what residents pay in a block or on an estate. The bigger issue is how charges work overall and how clearly they are set out.
“You see this just as much with estate management charges, where homeowners can face ongoing costs outside service charges that still have a real impact on affordability.
“That context is important when commonhold is discussed as a long-term alternative. It will have a role, particularly for new developments, but for existing buildings it is not a simple switch.
“Decisions still need to be made around funding, governance and long-term responsibility, whatever the ownership model.”
However, a spokesperson for the Residential Freehold Association (RFA), said: “The inclusion of a ground rent cap in the draft Leasehold and Commonhold Reform Bill represents a wholly unjustified interference with existing property rights which if enacted, would seriously damage investor confidence in the UK housing market and send a dangerous and unprecedented signal to the wider institutional investment sector.
“Property rights and contract law are fundamental drivers of domestic and global investor confidence in the UK. Instead of focusing on those reforms which address the issues that leaseholders care most about, the government’s draft Bill will tear up long-established contracts and property rights, which are pillars of the UK’s investment reputation.
“This is, despite the previous government’s own impact assessment showing compensation could exceed £27bn.The resulting forced exit of professional freeholders from the sector, will hinder building safety projects and disrupt the day-to-day lives of residents.
“We urge the government to instead focus on the reforms that would achieve real world benefits for leaseholders which they care most about, such as regulating managing agents, improving transparency and raising professional standards.”
