Key Takeaways
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Ground rent reform is coming: The government plans to cap ground rent at £250 per year, with it reducing to a peppercorn after 40 years.
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A shift away from leasehold: New leasehold flats will be banned, with commonhold becoming the default, and existing leaseholders given the option to switch, offering greater ownership and control.
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More transparency and protection: The reforms aim to make service charges and building costs clearer, tackling unfair practices and improving security for millions of leaseholders in England and Wales.
Ground Rent Caps and Commonhold Changes: What Leaseholders Need to Know
It has recently been announced that ground rent paid by leaseholders is to be capped at £250 a year. This comes as the UK government have published a Draft Leasehold and Commonhold Reform Bill, which will see several other changes, including making service charges and building costs clearer.
Leases typically include a clause permitting ground rent to double or increase as per the RPI (Retail Prices Index) inflation, which often results in difficulties obtaining a mortgage on the property, or issues arising when you come to sell the property.
The government’s reform proposes that ground rent will be capped at £250 a year and then reduced to a peppercorn after 40 years, meaning you will effectively not need to pay any ongoing ground rent once this period has passed. The government hopes that the cap will come into force in late 2028. In an effort to give more control to leaseholders, there will also be an opportunity to switch to commonhold, and new leasehold flats will be banned, with new flats built as commonhold. This means you will own your property outright, and shared areas are owned and managed with your neighbours.
Why These Reforms Matter for Leaseholders
As described in the Bill, the aim is to “give homeowners much greater security and control over their homes through access to fit for purpose and modern commonhold ownership and tackle abuse and bad practices in the leasehold system”. With upwards of five million leasehold properties in England and Wales, this Bill is set to improve the experience of all owners and future owners of leasehold properties.
At Howell Jones, we have a specialised team of conveyancing solicitors in Surrey who can guide and assist you with leasehold, ground rent, and commonhold matters. Contact our Surrey solicitors today to understand how the reforms may affect your property and ensure your rights are protected.
