UK to Cap Ground Rents in Major Property System Overhaul

The UK government has announced plans to cap ground rents on existing leasehold properties, marking a significant step in a wider reform of the country’s residential property framework and one of the most substantial changes to leasehold law in decades.

Under the proposals, ground rents charged to leaseholders in England and Wales would be capped at £250 per year, with rents set to reduce further over time under a phased transition. The measures extend protections introduced in recent years that restricted ground rents on most new-build homes, and are intended to apply to millions of existing leasehold contracts.

The reforms form part of a draft Leasehold and Commonhold Reform Bill, which aims to address long-standing concerns over the structure and cost of leasehold ownership. In addition to capping ground rents, the legislation proposes a gradual move toward reducing such charges to a nominal “peppercorn” level, effectively eliminating them over the long term.

The UK government said the changes are designed to simplify the property system, improve affordability for leaseholders, and reduce barriers to selling or refinancing leasehold homes. Officials have also indicated that the reforms are intended to support a transition toward commonhold ownership, a model under which residents jointly own and manage their buildings.

According to government estimates, more than five million leaseholders could be affected by the cap. Ground rent terms have been cited in recent years as a factor complicating property transactions, particularly where contracts include clauses allowing rents to increase periodically.

The announcement has prompted mixed responses across the property sector. Leaseholder groups have welcomed the move, citing reduced costs and greater clarity for homeowners. Meanwhile, some investors and asset managers have warned that changes to existing contracts could affect the valuation of property portfolios that include ground-rent income streams.

Several firms with exposure to leasehold assets have begun assessing the potential financial impact of the proposed legislation. Industry bodies have also raised questions about how transitional arrangements will be implemented and whether compensation mechanisms will be introduced.

The government has confirmed that the proposals will be subject to consultation, with further details to be set out as the bill progresses through Parliament. Timelines for implementation have not yet been finalised.

If enacted, the legislation would represent a substantial shift in the UK’s property ownership model, redefining how ongoing costs are applied to leasehold homes and reshaping a system that has been in place for generations.

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