Beyond the headlines of reinvigorating commonhold, draft reforms also propose to overhaul ground rents payable pursuant to long residential leases.
The Commonhold and Leasehold Reform Bill, published in January 2026, proposes to cap ground rents at £250 per year. This is regardless of the terms of the lease, which provide for increases linked to a particular index, or otherwise provide for aggressive increases to take place, such as the ground rent doubling on a particular anniversary of the lease.
The proposed reforms come as a step further to the Leasehold Reform (Ground Rent) Act 2022 which abolished ground rents for most new long residential leases granted after 30 June 2022 by restricting the maximum recoverable ground rent to a peppercorn. The proposal to restrict ground rent to £250 will apply retrospectively, affecting existing leases and overriding any contractual ability to increase the ground rent beyond the £250 cap, regardless of when they were granted.
Further, the Bill proposes a 40-year transitional period, with all ground rents eventually reduced to a peppercorn. It therefore goes beyond the 2022 reforms, with the intention of ultimately eliminating ground rent as a feature of residential home ownership.
The proposals are made against a backdrop of reforming and overhauling leasehold more generally, while the government progresses its aims of commonhold becoming the default form of tenure. Capping ground rent aligns with wider measures proposed by the Bill, such as banning new long residential leasehold flats and the abolition of forfeiture as a remedy.
Capping and ultimately banning ground rent will affect income streams for institutional investors who have built a capital value from portfolios based on ground rent income. Projected income as a result of anticipated ground rent increases will be dramatically affected, and has been criticised as being an unfair intervention into contractually agreed property rights. Conversely, leasehold campaigners consider that the proposed reforms will protect them from aggressive ground rent increases that have rendered some leasehold interests unattractive for sale or mortgage. Combined with the prohibition on forfeiture, which can result in leaseholders losing their property interest over non-payment of ground rent, the Bill's proposals represent a strengthening of leaseholder's rights.
The Bill is still in the early stages. Consultation regarding the Bill closed on 24 April 2026, following which the responses will be considered as part of the pre-legislative scrutiny, which recently commenced, and will inform any further drafting of the legislation. The Bill will also need to undergo full consideration and be reviewed by both houses of parliament before becoming law. It is anticipated that this could take at least a couple of years of working through before becoming law. The commencement date for implementation of the reforms may then be pushed back even further. However, given that the capping of ground rents got an express mention in the King's Speech on 13 May 2026, this shows that the current government is committed to progressing the Bill.
If enacted in its current form, the Bill would mark the beginning of the end of ground rents in residential property, addressing what the government describes as a central unfairness in the existing leasehold system.
