MPs Demand Accelerated £250 Leasehold Ground Rent Cap by Late 2027
A parliamentary committee has called for the expedited introduction of a £250 cap on yearly ground rents, pushing for implementation by late 2027. The government's current timeline anticipates this limit on annual fees, paid by leaseholders to freeholders, to come into force in late 2028. However, the Housing, Communities and Local Government Committee's report argues that leaseholders have endured excessive waits for governmental action on this issue.
Leasehold Reform Bill Scrutiny
The government maintains it is prioritising legislation to dismantle the leasehold system within the current Parliament, potentially extending until 2029. Approximately five million homes in England and Wales operate under leasehold agreements, where occupiers possess rights for a fixed term from a freeholder. Beyond capping ground rents, the draft Commonhold and Leasehold Reform Bill, presently under committee scrutiny, proposes a ban on the sale of new leasehold flats. It also seeks to simplify the conversion to commonhold, a system allowing joint ownership and responsibility for buildings without an expiring lease.
Ground rents, distinct from service charges covering maintenance, are paid for land occupation rights. In 2023/24, the average annual ground rent was estimated at £304. However, clauses permitting ground rents to double or increase with RPI inflation at fixed intervals are common, hindering property sales and mortgage approvals. While ground rents were abolished for most new residential leasehold properties in 2022, existing leasehold homes were unaffected. The committee advocates for the £250 cap to take effect two months after the bill's enactment, potentially by late 2027, rather than a date determined by ministers.
Transition Period and Investor Concerns
The government also intends to reduce ground rents to a peppercorn rate after 40 years. The committee questioned why this transition period could not be shortened to 20 years. Freeholders and investors have cited the need for extended adjustment time. However, the committee's report dismissed this argument, noting that governmental intent to cap ground rents has been apparent since at least 2017. The government's defence of a 40-year transition as a
