Proposed Ground Rent Reforms

What the Draft Commonhold and Leasehold Reform Bill Could Mean for Residential Leaseholders

Why Ground Rent Is Back in the Spotlight

Leasehold reforms are back in the headlines and one of the most topical issues is the Government’s plan to overhaul ground rent payments for hundreds of thousands of residential leaseholders in England and Wales.

On 27 January 2026, the Government published a draft Commonhold and Leasehold Reform Bill (“the draft Bill”) for pre‑legislative consideration, alongside explanatory material, including a policy statement on ground rent, and a consultation on moving to commonhold and restricting the creation of new leasehold flats.

At this stage, the proposals are not law. They indicate an intention for future reform, but they do not change the legal position today.

Whilst much of the draft Bill concerns a longer-term move to “commonhold” as a default tenure, the proposals currently attracting the greatest attention are those relating to ground rent in existing residential leases, which has long been a source of frustration, complexity and expense for many flat owners.

Scope of This Note

This note explains (and is limited to):

• what is proposed in the draft Bill in relation to ground rents;
• how those proposals sit alongside the law as it currently stands; and
• what they may mean in practice for existing residential leaseholders.

It is not legal advice, and you should speak to one of our leasehold reform specialists for advice tailored to your personal circumstances.

What Is Ground Rent and Why Does It Matter?

Ground rent is a charge paid by a leaseholder to the freeholder or landlord for the right to occupy the property. Unlike service charges or maintenance contributions, ground rent is not linked to the provision of services, and can therefore feel like a charge for nothing.

Mortgage lenders and valuers often treat ground rent as problematic:

• escalating ground rents can make properties difficult to mortgage or sell; and
• ground rents that double periodically can have a significant adverse impact on valuation.

Legislation already restricts ground rent in new leases. The Leasehold Reform (Ground Rent) Act 2022 limits ground rent in most new long residential leases to a peppercorn (effectively nil). However, existing legislation does not assist owners of existing leases, which is where the draft Bill seeks to step in.

What the Government Is Proposing?

Under the draft Bill, the ground rent proposals for existing long residential leases are:

(a) An Initial Cap of £250 per Year

Ground rent would be capped at £250 per annum where a lease currently requires a higher amount; and 

(b) An Eventual Reduction to a Peppercorn

After a transitional period (currently proposed to be 40 years), the capped ground rent would reduce further to a peppercorn, meaning that ground rent would ultimately fall to nil.

Timing and Legislative Uncertainty

Whilst the changes are drafted on the basis they would apply from commencement of the eventual legislation, these proposals are at draft stage only. The Bill is subject to consultation and pre‑legislative scrutiny and may change significantly before any final legislation is enacted.

Until any legislation is passed and brought into force:

• existing lease terms remain legally binding; and
• ground rent remains payable in accordance with the lease.

The current suggestion is that this could come into effect in 2028 however reforms of this scale may not be implemented for some time, due to timescales for Parliamentary process for a Bill to become law, and then the need for secondary legislation to be passed to bring those provisions into effect.  

The recent Leasehold and Freehold Reform Act 2024, much of which is yet to be brought into effect by still-awaited secondary legislation – demonstrates that Royal Assent (making a Bill into law) and practical commencement of the provisions in a modern piece of law, can be separated by a significant period of time. 

There is therefore no fixed timetable for when, or in what final form, these proposals might take effect.

What Would This Mean in Practice for Residential Leaseholders?

If enacted in its current form, the proposals would:

• cap high existing ground rents at £250 per year
• ultimately remove ground rent by reducing it to a peppercorn after the transition period; and
• potentially improve the mortgageability and saleability of affected flats.

However, until the legislation is in force:

• your ground rent remains payable;
• your lease terms do not change; and
• the final form and timing of reform remain uncertain.

Should Leaseholders Wait Before Extending Their Lease or Buying the Freehold?

In most cases, probably not, although this will depend on individual circumstances.

Statutory rights already exist to:

• extend a lease and reduce ground rent to a peppercorn; or
• collectively acquire the freehold of a building.

From a practical perspective:

• Valuation advice is key. In most cases, the leaseholders will primarily be concerned with how the proposed cap on ground rents may affect the calculation of the price payable to purchase the lease extension or purchase the freehold; as lawyers we cannot give you valuation advice, but we can put you in contact with specialist surveyors who will be able to provide you with such valuation advice.  
• Time continues to run. As the unexpired term shortens, lease value generally falls and the cost of statutory claims can increase – particularly once a lease approaches or falls below 80 years.  For that reason, it may not be sensible to delay a lease extension or other statutory claim purely in the hope that future reforms may be more favourable. 

In summary:

• The draft Bill proposes an initial £250 cap on existing ground rents, followed by a reduction to a peppercorn after a transition period (currently proposed to be 40 years);
• These reforms are intended to provide long-term certainty and eventual removal of ground rent as an ongoing cost of residential flat ownership;
• The terms of the draft Bill are, however, proposals only at this stage. There is no guaranteed commencement date and no guarantee of final form and content of any eventual legislation;
• Leaseholders should therefore continue to make decisions based on the law as it stands, while keeping the reforms under review.

Whether it is sensible to wait for potential changes will depend on personal circumstances. Specialist advice should be taken before making any decision.