Labour Is Capping Ground Rents At £250. Here's What That Means For Homeowners And Upcoming Buyers
The government has announced its plans to cap ground rents at £250 a year.
It’s a significant moment for leaseholders and a promise Labour had in their 2024 manifesto.
The announcement shows Keir Starmer is keen to focus on bringing down the cost of living, despite the ongoing speculation about his leadership and unpopularity with voters.
The changes are currently wrapped up in draft bill and need to be scrutinised before they can come into law by late 2028.
Here’s what you need to know about the reforms and how it could impact you.
What Is Ground Rent?
Ground rent is a cost incurred by some homeowners on top of the mortgage and usual bills.
If a property is a leasehold – meaning someone else owns the land the property sits on – ground rent will be a non-negotiable part of the lease.
The amount homeowners have to pay for ground rent can range hugely.
It’s also typically attached to blocks of flats or very large converted houses, where there are a lot of different properties all stacked on top of the same land.
While the Leasehold Reform (Ground Rent) Act 2022 ended ground rents for most new long residential leases going forward, the government wants to tackle the ground rents in older leases.
What Is The Government Doing About Ground Rent?
Capping It At £250
Labour will cap the total sum at £250 per year, impacting around five million homes.
After 40 years, it will be cut to a peppercorn rate, meaning nothing is paid.
It will also apply to most residential leasehold contracts that were entered into before July 2023.
New Leasehold Flats Will Be Banned
Only a limited number of leasehold properties will be permitted.
New flats will be commonhold, meaning the homeowner also owns the ground the flat is built on and the overall building with your neighbours.
This stops landlords from overcharging, and allows homeowners to actually get an input over spending, repairs and local rules.
Current leaseholders will be able to switch to commonhold easily, too.
Forfeiture Will Be Scrapped
Some homeowners currently end up losing their properties if they failed to pay even £350 in fees – but this rule, forfeiture, will be dropped.
The government intends to come up with a new system, led by the courts, with strict safeguards.
Crackdown on ‘Fleeceholds’
For those who own a freehold on a privately managed estate, extra costs may incur for the upkeep of the area – even if you already pay council tax.
That’s known as a “fleecehold” and impacts nearly two million households.
Labour want to end this altogether by scrapping laws which currently allow homeowners to losing access to their homes or have a lease slapped onto it if they miss payments as low as £100.
The government also plans to make service charge bills clearer and easier to understand while also helping people to challenge unfair costs.
Labour hopes to make it easier to establish a tribunal if a management company is not doing its job, too, so homeowners can get new ones set up.
Ministers intend to look into whether residents should run their estates as well, meaning homeowners are not forced to rely on a private management company.
What Did Keir Starmer Say About Ground Rent?
In a video on TikTok, the prime minister said: “I’ve spoken to so many people who say this will make a difference to them of hundreds of pounds.
“That’s really important because the cost of living is the single most important thing across the country.
“So this is a promise that we said we’d deliver and I’m really pleased that we’re delivering on that promise.”
Housing secretary Steve Reed also said: “The leasehold system has tainted the dream of home ownership for so many.
“We are taking action where others have failed –strengthening home ownership and calling time on leasehold for good.”
Reed also told broadcasters that no compensation would be paid to freeholders.