What do the new UK ground rent and leasehold reforms mean for homeowners in 2026?

Teodora (Teddy) Drangazhova February 4, 2026

The UK leasehold system is undergoing one of the most significant overhauls in decades. In January 2026, the Government unveiled major proposals to reform the leasehold system through a draft Commonhold and Leasehold Reform Bill and related measures aimed at addressing long-standing issues with ground rents and the broader leasehold framework affecting millions of homeowners in England and Wales. These changes, building on earlier legislation and proposals, seek to reduce unfair costs, increase rights and protections for leaseholders, and shift the market toward a fairer model of ownership. The impact of these reforms will be felt over several years and raises important legal and financial considerations for homeowners, buyers and sellers alike.

These reforms are not yet in force and depend on the draft legislation passing through Parliament.

Context: What is leasehold and why reform it?

Leasehold is a form of property ownership where a homeowner (the leaseholder) owns their home for a fixed term under a lease, while another party (the freeholder) owns the land beneath it. The freeholder can charge ground rent, service charges and other fees, and historically has had significant control over key aspects of ownership, including the right to forfeit the lease for certain breaches. Critics, consumer groups and many lawyers argue that this system has created systemic unfairness: escalating ground rents can make properties hard to sell, opaque service charges can be excessive, and leaseholders have limited control over how their homes are managed. These issues have been longstanding and widely reported in UK media and legal commentary.

Leasehold reform has been on the political agenda for years, with various Acts and consultations attempting to soften some of these problems. But the new Government’s 2026 measures represent a further step — and a politically charged one — toward recalibrating how leasehold operates and, in some respects, moving toward commonhold, an alternative ownership model that gives residents outright ownership of their homes and shared parts of their buildings.

Capping ground rent: what’s changing and who it affects

Ground rent cap for existing leaseholds

The most immediate and headline-making reform is that the Government intends to cap ground rents on existing leasehold properties in England and Wales at £250 per year, with a plan for that cap to transition down to a peppercorn (nominal) level after 40 years.

Ground rent is the annual amount a leaseholder pays to a freeholder simply for the leasehold interest in their property. It does not relate to a service provided, and historically some leases included escalating rents that doubled every decade, a structure that has been cited as a major factor in homes becoming difficult to sell or remortgage.

Under the proposed cap:

A leaseholder currently paying more than £250 a year will see their ground rent reduced.
After 40 years, the cap is intended to convert to a peppercorn rent, which in property law means a nominal amount with effectively no financial value.
This change is expected to benefit approximately 770,000 to 900,000 leaseholders who currently pay more than £250 a year in ground rent, according to recent government estimates reported in the national press.

This ground rent reform was announced by the Prime Minister as part of a broader package seeking to ease costs for homeowners and address one of the market’s most criticised features.

Who is affected?

Existing leaseholders with onerous ground rent obligations above £250 a year are the primary beneficiaries of the cap.
Leaseholders with low ground rents (£250 or less) may not see an immediate reduction but may still benefit over time as peppercorn status is reached.
Around 3.8 million leasehold homes carry ground rent obligations in England and Wales; only a subset will see direct financial savings from the new cap.

Why this matters in practice

Even a modest annual ground rent can make mortgage approval harder if it exceeds lender thresholds or if rents escalate over time, harming liquidity and transaction prospects in the housing market.

Banning new leasehold flats: shifting the tenure model

In parallel with the ground rent cap, the Government has published the draft Commonhold and Leasehold Reform Bill, which includes proposals to ban the sale of new leasehold flats (other than in exceptional circumstances) and promote commonhold as the standard structure for new multi-unit buildings.

Commonhold, in contrast to leasehold, gives flat owners a share in the freehold via an ownership of common parts and rights to govern their building together. This model is more akin to the condominium structures found in other jurisdictions and is widely supported by leasehold reform advocates as more equitable.

Key points about this reform:

If enacted in its current form, the Bill will mean that most new flats must be created and sold as commonhold rather than on long leaseholds, with only limited exceptions.”
Existing leaseholders will be given new pathways and information to transition to commonhold where feasible, though the details and mechanisms remain subject to parliamentary scrutiny and secondary legislation.
Forfeiture, a controversial practice where a freeholder can take back a property over a relatively small debt, is proposed to be abolished, replaced with more proportionate enforcement processes.

This shift signals a long-term rebalancing of ownership structures at the heart of UK residential property law.

Other reform elements: Rights and protections

While the ground rent cap and the move to commonhold attract most attention, other aspects of the reform agenda are targeted at strengthening leaseholder rights under existing legislation.

Better rights to manage and challenge charges

Reforms under the Leasehold and Freehold Reform Act 2024 (which became law but is still awaiting full implementation) include provisions to make lease extensions and enfranchisement (buying the freehold) easier and clearer. Although the Act is now law, many of its key provisions, including some lease extension changes, require commencement orders before they take effect in practice
Statutory lease extensions are being extended to up to 990 years, with ground rent for the extended portion set at a peppercorn (zero financial value) — dramatically reducing costs for many leaseholders once in effect.

Transparency and consumer protections

Leaseholders will gain stronger rights to information about service charges and building management, making it easier to challenge unfair or opaque fees.
Reform initiatives are also expanding access to Right to Manage (RTM), a mechanism whereby leaseholders take control of building management from a freeholder in certain circumstances.

Collectively, these reforms aim to put leaseholders in a stronger negotiating and legal position vis-à-vis freeholders and managing agents.

Deadlines, implementation and practical timing

Homeowners should expect that most reforms will not take effect immediately. The Government anticipates that passage of the Commonhold and Leasehold Reform Bill and subsequent secondary legislation will take time, suggesting that some measures, including the ground rent cap, may not come into force until around late 2028 at the earliest, depending on how the legislation progresses. This means homeowners, buyers, sellers, and lenders need to plan around transitional arrangements.

For example:

The £250 ground rent cap is currently a proposal linked to draft legislation; it will not apply until the Bill completes its passage and receives Royal Assent.
Existing provisions from the 2024 Act have begun to be switched on in stages but much still awaits commencement orders, consultations and detailed regulations.

Understanding these timelines and their practical effects on sales, purchases, remortgaging and lease extensions is critical for homeowners. Seeking early legal advice can help individuals time decisions appropriately.

Risks, consequences and market reaction

For homeowners

Leaseholders with onerous ground rents are likely to see direct financial benefits and improved marketability of their properties once the cap is in force. However, until implemented, uncertainty remains, and in some cases, expensive ground rents could still affect mortgage valuations and sale prospects today.

Homeowners should weigh carefully whether to wait for reforms before extending a lease, buying a freehold, or selling, taking into account the progress of legislation and potential timing of commencement.

For investors and landlords

Industry voices have warned that retrospective caps on ground rents could reduce the value of freehold portfolios and affect investment returns. Some pension funds and institutional investors have raised concerns about contract certainty and the impact on investor confidence in the UK property market.

These concerns highlight the tension between consumer protection and investors’ property rights, and many commentators expect the reforms could face legal and political challenge as they progress.

Practical advice for homeowners

Check your lease: Understand your current ground rent, service charge obligations and lease length with your solicitor. High or escalating ground rents are a clear red flag for potential future benefit from reform.
Plan major actions: If you are considering a lease extension or buying your freehold (enfranchisement), engage legal advice sooner rather than later to assess timing relative to the reforms.
Monitor legislation: The draft Bill will evolve through Parliament; stay informed about publication of secondary legislation and commencement orders — these will determine when reforms legally apply.
Consider commonhold: If you live in a multi-unit building, explore whether a transition to commonhold is viable for your block and what may be involved.

Conclusion: a turning point with ongoing change

For many homeowners in England and Wales, the new ground rent cap and leasehold reforms represent a meaningful step toward addressing entrenched inequities in the property system. By capping ground rents, abolishing punitive practices like forfeiture, and laying the groundwork for a shift to commonhold, the Government has signalled a commitment to modernising housing law.

However, the reforms are complex, staged over several years and subject to parliamentary scrutiny, legal challenge and detailed regulations. Their full impact will only crystallise as legislation is enacted and implemented. For homeowners, the practical question is not just what will change but when it will apply to you, and how to plan your legal and financial decisions around that timeline.

If you are affected by leasehold issues or considering buying, selling or extending a lease, early and specialist legal advice can help you navigate the reforms and protect your interests. Contact The Jonathan Lea Network expert property law team for tailored guidance and support.

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Please email wewillhelp@jonathanlea.net providing us with any relevant information or call us on 01444 708640. After this call, we can then email you a scope of work, fee estimate (or fixed fee quote if possible), and confirmation of any other points or information mentioned on the call.

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This article is intended for general information only, applies to the law at the time of publication, is not specific to the facts of your case and is not intended to be a replacement for legal advice. It is recommended that specific professional advice is sought before relying on any of the information given. © Jonathan Lea Limited.