Leaseholders in England and Wales to have ground rent capped at £250 a year

Ground rents are to be capped at £250 a year for leaseholders in England and Wales, Keir Starmer has announced, as his government unveiled proposals to ban leaseholds for new flats.

New leasehold flats will be banned and existing leaseholders will get the right to switch to commonhold in an attempt to give homeowners greater control over their properties, under proposals to be put out to consultation.

Making the ground rent announcement in a video posted on TikTok, Starmer said: “Good news for homeowners, we’re capping ground rent at £250. That means if you are a leaseholder, and your ground rent is more than £250, you’ll be paying less.

“And 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.”

It is the first time a British prime minister has made a major government announcement on TikTok.

The changes will be published in the draft leasehold and commonhold reform bill, which will be introduced on Tuesday.

Forfeiture – when leaseholders can lose their home and the equity they built up by defaulting on a debt as low as £350 – will also be abolished and a new enforcement regime will be implemented.

Those living in a building with a commonhold model will have a say in the annual budget and how the building is run, and new protections when things go wrong.

The housing secretary, Steve Reed, said: “If you own a flat you can be forced to pay ground rents that can become completely unaffordable. We said we’d be on the side of leaseholders – which is why today we are capping ground rent – helping millions of leaseholders by saving them money and giving them control over their home.

“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.”

The Residential Freehold Association (RFA), the trade body representing professional freeholders, said the ground rent cap was “wholly unjustified” and warned over the impact on the UK’s reputation for investors.

A spokesperson for the RFA said: “The inclusion of a ground rent cap in the draft bill represents a wholly unjustified interference with existing property rights which if enacted, would seriously damage investor confidence in the UK housing market and send a dangerous and unprecedented signal to the wider institutional investment sector.

“Property rights and contract law are fundamental drivers of domestic and global investor confidence in the UK.”