New £250 Ground Rent Cap Announced for Leasehold Properties

One thing that stands out in particular under the proposals, which will bring relief to many leaseholders, is news that annual ground rent will be capped at £250. Not only that, it will reduce to a nominal “peppercorn” rate after 40 years.

In an area like Swindon, where apartment living plays a key role in local development, particularly new-build development, the proposed ground rent cap could remove a major barrier to mortgage approval and resale.

Here’s why it matters to buyers, homeowners and buy-to-let investors here in Swindon.

How Will Ground Rent Caps Help Property Sales?

Ministers say the move will ease financial pressure on leaseholders, removing one of the most controversial aspects of the current system.

But it’s more than simply financial pressure. The issue of ground rent doubling has become a blight on the property sector in recent months and years, as more and more leasehold properties have reached the point where ground rent has doubled (often after 25 years) or is due at some point fairly soon – and will be set to double again, and even if that is in another 25 years, it still poses a serious problem. The issue is that it not only affects the leaseholder’s back pocket but can also push the ground rent beyond a level acceptable to mortgage lenders.

This isn’t a hypothetical fancy, either – it happens frequently and has caused real problems for the leasehold sales market.

It has left many otherwise willing leasehold purchasers unable to proceed with a transaction, and leasehold owners unable to sell without securing a deed of variation – a costly and time-consuming process.

The reforms were announced this week by Prime Minister Keir Starmer, with his address focussing on how these changes will help households grappling with the cost of living.

Nevertheless, the overall impact on the property market, given that these proposals will ease leasehold ownership and make it more attractive again, should not be underestimated.

One of our House Group Members, Louisa Rowlands, shared an experience she had on a sale a few months ago:

“I had agreed a sale on a flat in Redhouse to a charity, purchasing the property to provide housing support.

“The spectre of escalating ground rent was something that they weren’t prepared to move ahead with, without the issue being addressed.

“A Deed of Variation to protect their interests might have solved the issue, but being a cash buyer meant there was no impediment imposed by a mortgage lender due to the threat of ground rent escalation. It was simply their preference – an understandable one, but not something that put up a transactional barrier.

“The seller’s solicitor advised that the Freeholder was not willing to entertain this – the buyers, unfortunately, would either have to live with it, or choose not to, and it was as simple as that.

“They chose not to. Instead, they withdrew from the purchase, the seller lost a buyer, and months had been wasted, leaving a sour taste all round – and yet, the Freeholder was entirely unaffected.

“This is just one reason I feel these reforms are not only welcome, but overdue.”

What Other Leasehold Reforms are Proposed?

Alongside the ground rent cap, the government plans to ban almost all new leasehold homes (as a legal definition), with only limited exceptions, and introduce legislation designed to give homeowners greater authority over their properties.

As well as escalating ground rent, shorter leases eventually cause problems for leasehold owners, as they reach a point where mortgage lenders will no longer offer mortgages to buyers – and when cash buyers become the only option, resale values start to drop.

Another of our House Group Members, Fredy Saju, recalls a particular sale:

“It was a flat on Dragonfly Road in SN3. The owner had let the property out for a number of years, but she was forced to sell it due to a change in circumstances. Unfortunately, the lease had dropped below 70 years, and the cost to extend it was in the tens of thousands!

“It meant that more than one sale collapsed as a result, until eventually the property was repossessed by the lender. Even then, a buyer couldn’t be found due to the lease. Eventually, the poor lady managed to pay to have the lease extended herself – better that and allow the property to sell, releasing what equity there was to be claimed, than to face bankruptcy.

“It was such a mess – and so unavoidable if a bit of compassion and common sense could have just been applied to allow any one of those agreed sales to go through.”

More than five million leaseholders are expected to benefit from the draft Commonhold and Leasehold Reform Bill, which the government says will fundamentally reshape homeownership across England and Wales.

Cost Savings Through Leasehold Reform

By limiting ground rent and eventually reducing it to zero in real terms, ministers aim to bring an end to what they describe as excessive charges with little or no service provided in return.

According to government estimates, some leaseholders could save over £4,000 across the lifetime of their lease. Actually, I believe they have underestimated the saving.

But I also don’t see the saving, per se, as being the main cause for relief. These reforms are expected to help unlock stalled property sales, where high or escalating ground rents have made homes difficult to mortgage or sell – and that will make a real difference to local people in Swindon and across Wiltshire.

Housing secretary Steve Reed has since reiterated that the current system has left many flat owners exposed to rising, unaffordable ground rents, and that the reforms will save leaseholders money while giving them greater control over their homes. But he adds the more pertinent point that the leasehold model had undermined confidence in homeownership for too long.

For Swindon buyers operating within tighter affordability limits, removing the risk of escalating ground rent could be the difference between proceeding and pulling out. But more than that, it removes a barrier that prevents lenders from offering mortgages to these buyers in the first place.

If passed into law, the proposed reform will also abolish forfeiture, a mechanism that allows leaseholders to lose their homes and any built-up equity for relatively small debts. The aim is to replace it with a new enforcement framework that rebalances the relationship between leaseholders and freeholders.

This really is long overdue.

A revamped commonhold system will form a central part of the reforms. Existing leaseholders will be given a more transparent, straightforward route to convert to commonhold, where residents collectively own and manage their building. Under the new model, homeowners would have a direct say in budgets, building management, and major decisions, and would have stronger protections when disputes arise.

A Final Thought

The government says the updated commonhold framework will be designed to work across different types of developments and to meet the requirements of mortgage lenders, with more explicit rules on governance, repairs, and accountability.

These changes build on measures already underway through the Leasehold and Freehold Reform Act 2024, including improved transparency around service charges. The announcement follows the passage of the government’s Renters’ Rights Act, which aims to strengthen protections across the wider housing sector.

National reforms can have very different effects at a local level, however. In Swindon, leasehold flats already form a significant part of the housing mix, especially in older converted buildings around the town centre and in the large housing estates that have grown up around the ring road in SN3 and SN5.

In those modern new-build, edge-of-town developments, which in many ways we need if our own local young people are going to find an opportunity to get their feet on the ladder, flatted developments make up a large proportion of what is being built.

Understanding how these changes apply to individual leases will be key.