What is ground rent and how are leasehold rules changing?
Getty ImagesThe government has set out more details of its planned shake-up of the leasehold system in England and Wales.
The draft Leasehold and Commonhold Reform Bill includes plans to cap ground rent at £250, ban the sale of new leasehold flats and give homeowners greater control over how their buildings are managed.
What is leasehold?
There are around five million leasehold properties in England and Wales, of which 70% are flats.
At the moment, the freeholder of a property generally owns the building and the land beneath it, outright and forever.
Leaseholders effectively buy the right to live in the property for a fixed period of time.
Leasehold flats are found in all sorts of properties - from converted Victorian houses to purpose built skyscrapers - and tend to be concentrated in big cities.
Scotland and Northern Ireland have different systems of property ownership.
What is ground rent and how are the rules changing?
Ground rent is the fee paid by leasehold homeowners for the land beneath their buildings.
It must be paid under the terms of their lease, and the amount due can double or increase in line with inflation at fixed intervals, which can make it difficult to sell or get a mortgage for a property.
Ground rents were abolished for most new residential leasehold properties in England and Wales in 2022, but remained for existing leasehold homes.
The government says approximately 3.8 million properties still attract ground rent across England and Wales, with homeowners collectively paying more than £600m in 2025. The English Housing Survey estimates the average annual ground rent in 2023/2024 was £304.
As part of the government's reforms, ground rent will be capped at £250, before falling to a "peppercorn" rate - effectively zero - after 40 years.
The bill will now be scrutinised by MPs on the Housing Committee before making its way through Parliament, with the cap potentially coming into force in late 2028.
What is commonhold and will leaseholds be banned?
Campaigners have long argued that England and Wales's system of flat ownership is unfair, with leaseholders having little control over property costs.
Labour's 2024 election manifesto promised to "finally bring the feudal leasehold system to an end".
Under the bill, leasehold will be banned "except in limited cases", and developers will no longer be allowed to sell new flats as leasehold.
Instead, new flats will be sold as commonhold - where neighbours collectively own the ground their flats are built on as well as the building itself. The commonhold model is widely used across the world.
Long-term campaigner Sebastian O'Kelly from the Leasehold Knowledge Partnership charity welcomed the bill: "This is a transformative bit of legislation that will turn leaseholders into proper flat owners, as is already the case in the rest of the world."
However, it is not yet clear how existing leasehold properties will transition to the commonhold model.
A government consultation on commonhold closes on 24 April.
What are service charges and how are the rules changing?
Leaseholders pay annual service charges to cover the cost of maintenance and repairs.
The BBC has been contacted by hundreds of people who say their charges have spiralled in recent years.
The former Conservative government had already said it would make service charges more transparent in the Leasehold and Freehold Reform Act 2024, which took effect just before the last general election.
The current Labour government says its reforms will build on those changes to make service charge bills clearer and help people challenge unfair costs.
It also says the move to commonhold will give existing home owners unlimited control over their properties.
The government has also said it will scrap something called "forfeiture". This process allows freeholders to start court action to seize someone's property if they have a service charge debt of more than £350. It's rare, but it does happen.
This will be replaced by a new court-led process "with strict safeguards for more extreme cases".
The government is also consulting on how to tackle the issue of charges levied on homeowners who have property on private estates.
How have freeholders reacted to the government's plans?
Many freeholders have reacted angrily.
Last year a group of freeholders unsuccessfully tried to challenge the previous government's leasehold reforms in the High Court.
The Residential Freehold Association criticised the ground rent cap as a "wholly unjustified interference with existing property rights". It says it will mean many professional freeholders will leave the sector, "hinder[ing] building safety projects and disrupt[ing] the day-to-day lives of residents".
It called on the government to focus on other aspects of housing reform, "such as regulating managing agents, improving transparency and raising professional standards".
