Ground rents to be capped at £250.00 per year for leaseholders

Ground rent is an annual payment due under a residential long lease to the freeholder of the building, and whilst some leases have fixed ground rent, many others have ground rents which cannot easily be calculated or determined.

Leases with doubling ground rent clauses, unusual escalating ground rent provisions, or ground rents which are calculated with RPI inflation can affect a borrower’s ability to obtain a mortgage, and many flat owners are finding themselves with flats which they cannot sell.

For many years there has been a call in the industry for sweeping changes to be made in this area, and whilst the changes which were implemented by the Leasehold Reform Act 2022 were very welcome, this only applied to new leases.

Today the Government have announced that that ground rents are to be capped at £250.00 a year for existing residential long leases in England and Wales. The reforms will be published in the draft Leasehold and Commonhold Reform bill, which will be introduced on Tuesday.  BBC news has reported that the bill will now be scrutinised by MPs on the Housing Committee before making its way to Parliament, with the Government suggesting that the cap could come into force in late 2028.