The government has published a draft Bill that would cap existing ground rents at £250 a year, abolish forfeiture and end the use of leasehold for most new flats. This article sets out what is proposed, what is already in force for leaseholders, and what the proposals could mean for anyone buying or owning a leasehold home in England and Wales.
What is a ground rent, and why does it matter to a buyer?
A leasehold owner holds a home for a fixed term rather than owning the land outright. Many leases require an annual payment to the freeholder, known as ground rent. On top of that, leaseholders of flats typically pay service charges for the upkeep of the building and may face one-off bills for major works.
Ground rent matters beyond the annual cheque. According to the government’s leasehold toolkit, ground rents are “annual payments that can increase significantly over time”, and some leases include escalation clauses that raise the sum at set intervals. Lenders and conveyancers look closely at those terms, which is one reason leasehold purchases can be harder to price and to sell than freehold ones. Buyers weighing the wider budget can read the real costs of buying a UK home for the other items that sit alongside the price.
What does the draft Bill propose?
The draft Commonhold and Leasehold Reform Bill was published on 27 January 2026 for pre-legislative scrutiny, which means a parliamentary committee examines it before a final version is introduced. According to the government’s publication page, it covers England and Wales and is a 363-page command paper. Its main elements are:
- A ground rent cap. Existing ground rents would be capped at £250 a year, changing to a peppercorn (in practice, no money rent) after 40 years.
- A ban on most new leasehold flats. The Bill would end the use of leasehold for “most new flats”, with the scope of any exemptions subject to consultation.
- The end of forfeiture. Forfeiture is the legal route by which a landlord can, in some circumstances, bring a lease to an end over unpaid debts. The Bill would abolish it and replace it with a new lease enforcement scheme.
- Easier commonhold. Commonhold is a form of ownership in which each flat owner holds their unit outright and the owners jointly run the shared parts of the building. The Bill would make it easier for existing leaseholders to convert.
- Estate rentcharges. The enforcement powers attached to estate rentcharges would be repealed.
The government says the reforms are aimed at what it calls over 5 million leasehold homes and their owners, and its announcement claimed that many leaseholders would see savings of over £4,000 over the course of their lease. That is a government estimate of potential savings, not a guarantee for any individual household.
How would a £250 cap work in practice?
The cap works as a ceiling, not a reset. The leasehold toolkit stresses that it is “a cap on the maximum amount that can be charged and will not increase anyone’s ground rents”. A leaseholder already paying £100 a year would continue to pay £100; only rents above £250 would be brought down.
A short worked example, using illustrative figures rather than any real lease, shows the scale of the effect for someone at the higher end:
| Item | Illustrative figure |
|---|---|
| Ground rent in the lease | £400 a year |
| Capped ground rent | £250 a year |
| Annual difference | £150 |
| Difference over 40 years, if the rent stayed flat | £6,000 |
The arithmetic is £400 minus £250 equals £150, and £150 multiplied by 40 equals £6,000. In reality many ground rents rise under their lease terms, so the gap could be larger or smaller, and leases differ in how and when rises occur. The point of the example is to show why a flat £250 ceiling matters most for leases with high or escalating rents, and not at all for leases that already sit below it.
Who pays more than £250 today?
The government’s impact assessment, as reviewed by the Regulatory Policy Committee and published on GOV.UK, gives some sense of scale. It cites around 3.8 million residential leasehold properties subject to a ground rent obligation across England and Wales. It estimates between 770,000 and 900,000 dwellings paying more than £250 a year.
Using those two figures, the cap would bite on roughly 20% to 24% of leasehold homes with a ground rent (770,000 divided by 3.8 million is about 20%, and 900,000 divided by 3.8 million is about 24%). The remainder already pay £250 or less and would see no change in their annual payment.
The same assessment estimates that the cap “preserves between 39% and 45% of total ground rent value over the policy lifetime”. In plain terms, freeholders would keep a substantial share of the ground rent income they are due under current leases, which is part of why the question of fairness to both sides has featured in the debate. The Regulatory Policy Committee noted it was unclear whether that percentage is stated in nominal or discounted terms, so it should be read as a broad indication.
When could any of this take effect?
Nothing in the draft Bill is law yet. According to the government’s announcement, the ground rent cap could come into force in late 2028, subject to parliamentary timings. The publication page gives no commencement dates for the Bill’s other measures.
The process matters. A draft Bill is a proposal. Parliament’s Housing, Communities and Local Government Committee began pre-legislative scrutiny on 4 February 2026, and a final Bill must still be introduced, debated and amended before it becomes an Act. Details such as the treatment of particular lease types, including the question of whether so-called “quid pro quo” leases should be exempt from the cap, were still subject to consultation at the time of the draft’s publication. Anyone relying on a specific outcome for a purchase or sale should treat the proposals as unsettled.
Is the ban on new leasehold flats confirmed?
The direction is clear, but the detail is not. A separate consultation, “Moving to Commonhold: banning leasehold for new flats”, ran from 27 January 2026 to 24 April 2026. According to the consultation page, it asked for views on:
- the scope of the proposed prohibition and the case for exemptions;
- how the ban would work alongside a reformed commonhold model;
- the start date and any transitional arrangements;
- the costs and benefits of moving to commonhold; and
- the commonhold framework itself.
As at the page’s last update, the government said it was analysing feedback and would publish the outcome there. Until it does, the start date, the exemptions and the transition rules remain open.
For buyers, the practical consequence is that new-build flats may increasingly be sold on different ownership terms over the coming years, though the timing is not yet fixed. Commonhold has been rare in England and Wales, so mortgage lenders and conveyancers will need time to become familiar with it.
What has already changed for leaseholders?
Not everything is waiting on a new Bill. The leasehold toolkit lists measures already in effect under the Leasehold and Freehold Reform Act 2024:
- Lease extensions and freehold purchase. Since January 2025, leaseholders no longer need to have owned their property for two years before starting the process.
- Right to Manage. Since March 2025, in most circumstances leaseholders are no longer required to pay the freeholder’s legal fees when making a Right to Manage claim. The limit on non-residential space in mixed-use buildings has risen from 25% to 50%.
- Building safety protections. The toolkit dates these to July 2024.
- Assured tenancy changes. The toolkit dates these to December 2025.
Some transparency measures, including standardised service charge demand forms and annual reporting, are not yet in force; the toolkit says the government will bring them in “as quickly as possible”. Meanwhile, existing rights remain: leaseholders can ask for a written summary of costs, challenge unreasonable service charges at the First-tier Tribunal, and expect to be consulted when major works exceed certain cost thresholds.
How should the uncertainty shape a leasehold decision?
Reform of this kind is a reason for careful reading of the lease, not for assumptions. Several questions are worth putting to a conveyancer before committing to a leasehold purchase:
- What is the current ground rent, and does it rise? If it does, how often and by how much?
- How many years remain on the lease? Shorter leases can be harder to mortgage and costlier to extend.
- What are the service charge and building insurance costs, and are major works planned?
- Does the freehold sit with a management company, and have residents considered Right to Manage or enfranchisement?
Those answers affect affordability regardless of what Parliament decides. The cost of borrowing also shapes how much of a monthly budget is left for ongoing charges, a theme covered in how mortgage rates affect affordability. People comparing ownership with the alternative may also find the economics of renting or buying a useful companion.
The outlook for leaseholders and buyers
The proposals would be the most significant change to how many flats are owned in England and Wales in years, but they remain proposals. A £250 ceiling on existing ground rents, a move away from new leasehold flats and the end of forfeiture each address long-standing complaints; each still depends on the final wording of legislation, on consultation outcomes and on commencement dates that have not been fixed beyond the government’s indication of late 2028 for the cap.
Meanwhile, the measures already in force give existing leaseholders more room to extend leases, take over management and challenge charges. For now, the sound approach is to price a leasehold home on the terms of the lease as it stands, and to treat any future reduction in ground rent as a possible benefit rather than a certainty.
This article is general information, not personalised financial advice. Rules, rates and legislative proposals change, so check current official guidance before making decisions.
Sources: GOV.UK
