The government has set out more details of its planned shake-up of the leasehold system in England and Wales.

The draft Leasehold and Commonhold Reform Bill includes plans to cap ground rent at £250, ban the sale of new leasehold flats and give homeowners greater control over how their buildings are managed.

What is leasehold?
There are around five million leasehold properties in England and Wales, of which 70% are flats.

At the moment, the freeholder of a property generally owns the building and the land beneath it, outright and forever.

Leaseholders effectively buy the right to live in the property for a fixed period of time.

Leasehold flats are found in all sorts of properties – from converted Victorian houses to purpose built skyscrapers – and tend to be concentrated in big cities.

Scotland and Northern Ireland have different systems of property ownership.

What is ground rent and how are the rules changing?
Ground rent is the fee paid by leasehold homeowners for the land beneath their buildings.

It must be paid under the terms of their lease, and the amount due can double or increase in line with inflation at fixed intervals, which can make it difficult to sell or get a mortgage for a property.

Ground rents were abolished for most new residential leasehold properties in England and Wales in 2022, but remained for existing leasehold homes.

The government says approximately 3.8 million properties still attract ground rent across England and Wales, with homeowners collectively paying more than £600m in 2025. The English Housing Survey estimates the average annual ground rent in 2023/2024 was £304.

As part of the government’s reforms, external, ground rent will be capped at £250, before falling to a “peppercorn” rate – effectively zero – after 40 years.

The bill will now be scrutinised by MPs on the Housing Committee before making its way through Parliament, with the cap potentially coming into force in late 2028.