Residential Real Estate

Claire Allan, Cerys Eyre
January 2026

Overview of the Proposed Changes

This week the Labour Government announced plans to cap existing residential ground rents at £250 per year from 2028, ultimately reducing to a peppercorn after 40 years. The introduction was made in the draft Commonhold & Leasehold Reform Bill, now entering pre-legislative consideration.

It is widely considered that the market has been in the hands of landlords and investors for too long. The residential market has been threatened with major overhaul for 20+ years. Labour has made it one of their priorities to put leaseholders first.

Key Effects on Landlords

This proposed legislation will override any lease where the ground rent is higher than £250 and/or has escalating provisions (i.e., doubling or RPI).

The intentions behind the cap are to save leaseholders hundreds of pounds a year, keep money in their pockets and tackle the cost-of-living crisis.

The effect on landlords could potentially be hundreds of thousands of pounds. Unlike with the statutory lease extension process set out under the Leasehold Reform, Housing and Urban Development Act 1993, landlords will not be compensated for the loss of their ground rent income.

Annual portfolio income streams will significantly decrease. Assets, whether a small investment portfolio for somebody’s retirement or a large-scale ground rent investor’s portfolio, will likely see a decline in value. 

On the other hand, some may find value in the certainty provided by 40 years of £250 per annum compared to an index-linked increase.

We have already seen institutional landlords challenge the abolition of marriage value in the Leasehold and Freehold Reform Act 2024 under A1P1 (the right to peaceful enjoyment of possessions). We could possibly see the same happen here.

The Draft Commonhold & Leasehold Reform Bill –What Else?

This legislation, once enacted, will take huge strides toward ending leasehold tenures, which many consider to be an archaic and unfair form of homeownership. The bill sets out further historic changes:

  • a ban on new leasehold flats;
  • will move to commonhold and make commonhold the default tenure;
  • ending forfeiture (or the threat thereof) for breach of lease and/or non-payment of service charge and/or ground rent; and
  • repeal of estate rent charges;

What Next?

We continue to be in a state of  ‘watch this space’ but it’s clear the landscape is changing. Lawrence Stephens’ specialist Leasehold Enfranchisement Team will continue to monitor the progress of the Draft Commonhold & Leasehold Reform Bill.

For any specific or tailored advice, please do get in touch with the Leasehold Enfranchisement Team, Director and Head of Leasehold Enfranchisement Claire Allan and Associate Cerys Eyre.