The Government has announced a cap on ground rents at a fixed level of £250. Here, Linz Darlington, MD of lease extension specialists Homehold, shares his thoughts on the move.

The Labour government’s promise to cap ground rent at £250 is a concession from the preference of a peppercorn (£0) that Matthew Pennycook has shared in the Commons. There is little doubt that this walk-down comes after heavy lobbying from the freehold sector and the threat of continued litigation following last year’s challenge at the High Court of the Leasehold and Freehold Reform Act.

Ground rent is money paid without anything in return. Clauses have been added to residential leases which mean ground rents can rise aggressively as the years of the lease pass. If the ground rent is too high, it can make a lease extension expensive and your flat hard to sell or remortgage. If you don’t pay it, your freeholder can invoke the draconian measure of repossessing your flat.

A cap at £250 is a sensible choice. It means that freeholders will continue to receive an income stream for the moment, while recognising that this will be eroded over time by inflation and eventually removed after 40 years. For leaseholders, while they may be disappointed that they must fork over ‘money for nothing,’ a cap at £250 will make the payment more manageable and will likely solve issues with remortgaging.

While this is a positive statement, clearly it is a long way from becoming law. We are still waiting for much of the Leasehold and Freehold Reform Act 2024 to be implemented—18 months after it gained Royal Assent.

In November 2024, Matthew Pennycook promised in a ministerial statement that reform would happen “as soon as possible”, and he committed to consulting on the rates used to calculate lease extension prices by “next summer” (2025). These promises have not been kept, which means this reform is not of any tangible benefit to leaseholders.

The cap is contained within the draft Commonhold and Leasehold Reform Bill, which is 363 pages long and highly contentious. For the cap to be of any benefit to leaseholders, we need this passed promptly and onto the statute books. At the current pace of reform, it may not be for many years to come.

Leaseholders are tired of hearing what the government intends to do “in due course”. The speed of leasehold reform is glacial. We need meaningful reform and prompt implementation.