The UK Government has issued a response to a parliamentary petition calling for the abolition of ground rent for existing residential leasehold properties.
While the petition asks for immediate abolition, the Government’s current proposal takes a more gradual approach.
What the Government Is Proposing
Under the draft Commonhold and Leasehold Reform Bill, the Government proposes:
• A cap of £250 per year on ground rent for most existing long residential leases
• Ground rent to reduce to a peppercorn (effectively zero) after 40 years
• The £250 cap will not increase over time
Importantly, the proposal states that:
– If your current ground rent is below £250, you will continue paying that amount.
– If your lease allows increases, they cannot exceed £250 per year.
The policy is intended to provide certainty to leaseholders, lenders and the wider housing market.
Why the Government Says This Matters
The Government states that high ground rents have created several problems:
• Difficulty obtaining mortgages
• Delays or failures in property sales
• Reduced mobility in the housing market
• Financial pressure on leaseholders
Mortgage lenders often apply additional scrutiny when ground rent exceeds £250 per year or 0.1% of property value, which can disrupt property transactions.
The Government estimates:
Around 3.8 million leasehold properties currently pay ground rent
770,000–900,000 pay more than £250 annually
Leaseholders collectively paid over £600 million in ground rent last year
The proposed reforms are estimated to save leaseholders £10–£12.7 billion over time.
Why Ground Rent Is Not Being Immediately Abolished
Although many leaseholders favour immediate abolition, the Government argues that doing so could create:
• Significant disruption to financial markets
• Insolvency risk for freeholders and investors
• Legal challenges relating to property rights
The proposed £250 cap followed by a peppercorn after 40 years is presented as a compromise.
Wider Leasehold Reform
The proposed changes form part of the Commonhold and Leasehold Reform Bill, which also aims to:
• Make it easier for buildings to convert to commonhold ownership
• Reduce costs associated with collective enfranchisement
• End the use of leasehold for most new flats
The Government has described these reforms as part of a long-term plan to replace the traditional leasehold system with commonhold ownership.
What This Means for Leaseholders at Centenary Mill
Ground rent arrangements vary between developments.
Leaseholders may wish to check:
• The ground rent provisions in their lease
• Whether escalation clauses exist
• Whether the amount exceeds typical mortgage thresholds
Understanding how these reforms develop will be important for leaseholders across England and Wales.
Further Information
You can read the full Government response here:
https://petition.parliament.uk/petitions/750566
Leasehold reform is evolving quickly, and developments such as these may influence the long-term governance and ownership models of residential buildings like Centenary Mill.