Millions of leaseholders across England and Wales will see their ground rents capped at £250 a year, the government has announced as the Commonhold and Leasehold Reform Bill was published this week.

Making the announcement on TikTok on Tuesday morning, for some reason and despite the network being viewed with suspicion by the government because of its alleged links to the Chinese state, Prime Minister Keir Starmer explained how the cap will save some families hundreds of pounds

New leasehold flats will also be banned and homeownership strengthened under the bill.

Over five million leaseholders and future homeowners will benefit from stronger control, powers and protections, through the draft bill, the government says.

It will cap ground rent at £250 a year before ultimately reducing it to a peppercorn after 40 years.

The government says the move will ensure leaseholders keep more of their hard-earned cash, with many seeing savings of over £4,000 over the course of their lease, improving cost of living for millions.

In his TikTok video, Keir 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.”

Secretary of State for Housing Steve Reed added: “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.”

Forfeiture, whereby 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 rebalance the system.

A new process to make it easier for existing leaseholders to convert to commonhold will also be introduced under a revamped commonhold model where homeowners will receive a stake in the ownership of their buildings and be given a stronger say in the issues that affect them, with greater control over how the building is managed and the bills they pay.

The reinvigorated commonhold system will ensure it works for all types of developments, as well as mortgage lenders, with strong management rules in place around repairs and leadership, and greater rights for homeowners.

Those living in the building will have a say in the annual budget and how the building is run, and new protections when things go wrong. Current leaseholders will also be given the opportunity to switch to commonhold, where the majority of residents agree to it.

The reforms build on action currently being undertaken by the government to implement the Leasehold and Freehold Reform Act 2024, including increased transparency over service charges so that leaseholders can better hold their landlords to account.

Not everyone is happy with the cap, though. Reacting to the publication of the draft bill, a spokesperson for the Residential Freehold Association (RFA), said: “The inclusion of a ground rent cap in the draft Leasehold and Commonhold Reform 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. Instead of focusing on those reforms which address the issues that leaseholders care most about, the government’s draft bill will tear up long-established contracts and property rights, which are pillars of the UK’s investment reputation. This is, despite the previous government’s own impact assessment showing compensation could exceed £27bn.The resulting forced exit of professional freeholders from the sector, will hinder building safety projects and disrupt the day-to-day lives of residents.

“We urge the government to instead focus on the reforms that would achieve real world benefits for leaseholders which they care most about, such as regulating managing agents, improving transparency and raising professional standards.”

But Martin Boyd, Chair of the Leasehold Advisory Service said: “This is a significant milestone for leaseholders and marks the beginning of the end for the leasehold system as we know it. The draft bill tackles some of the most damaging features of leasehold, including high and escalating ground rents and the threat of forfeiture, which has left some leaseholders at risk of losing their homes over relatively small debts.

“More fundamentally, the bill signals a decisive shift away from leasehold as the default form of home ownership. Moving towards commonhold and making it easier for existing buildings to convert where leaseholders choose to do so, has the potential to give homeowners genuine control, security and long-term certainty over their homes.”

The draft bill will now move into pre-legislative scrutiny, expected to be carried out by the HCLG Select Committee. Subject to parliamentary timings, the ground rent cap could come into force in late 2028.