The government has opened an eight-week consultation on whether some leaseholders and freeholders should be carved out of the planned £250 ground rent cap, in a move that could matter directly to landlords holding leasehold flats.
MHCLG said it is considering a narrow exemption for so-called quid pro quo leases, where a higher ground rent was specifically agreed in exchange for a lower upfront premium. The consultation runs until 27 August and asks whether those leases should be treated differently when the cap is brought in through the Commonhold and Leasehold Reform Bill.
For landlords, the timing matters because the broad direction of travel has not changed – ministers still want to cap ground rents at £250 a year before shifting them to a peppercorn after 40 years – but this consultation shows there is still room for technical changes that could affect the value, saleability and future running costs of leasehold investments.
Government tests a narrow exemption
The consultation is tightly drawn. Ministers say they are not looking at a broad escape route from the cap, only whether a genuine negotiated arrangement should be protected where the leaseholder received at least an equivalent discount on the premium in return for paying a higher rent.
MHCLG says the default policy remains a cap of £250 a year for existing residential long leases granted before the Leasehold Reform (Ground Rent) Act 2022 took effect, followed by a move to a peppercorn after 40 years. The department argues this is needed to tackle unaffordable ground rents, simplify the sale of leasehold homes and unwind what it calls an outdated two-tier system.
At the same time, the consultation accepts there may be a small subset of leases where a cap could unfairly strip out payment that was consciously agreed as part of the original deal. The department is therefore asking whether the freeholder should have to prove a lease is genuinely quid pro quo and whether the leaseholder’s premium discount must be at least equivalent to the extra ground rent.
Why leasehold landlords should pay attention
Landlords with leasehold flats are caught between two risks here. If the government keeps the policy tight, some investors may lose value they previously assumed was baked into a lease structure. But if the exemption is drafted too loosely, the market could be left with exactly the sort of complexity and uncertainty ministers say they want to remove.
This follows Landlord Knowledge’s earlier coverage of the planned ground rent cap, which showed how the reform could reshape costs and pricing for flat landlords. The latest consultation suggests ministers are still trying to stop legitimate edge cases being swept up without reopening the wider argument over whether high ground rents should survive at all.
There is also a transaction angle. One of the government’s stated aims is to make leasehold buying and selling simpler. If too many leases end up needing technical assessment to decide whether they are exempt, landlords trying to sell flats may still face delays, valuation arguments and lender caution.
That sits alongside wider pressure on leasehold-backed investments. Recent Landlord Knowledge coverage of the widening gap between house and flat prices has already highlighted how flat landlords are operating in a more politically exposed part of the market than many traditional buy-to-let investors.
Ministers also make clear that any exemption must not become a loophole for future abuse. The paper repeatedly stresses the risk that stronger parties could use complexity to sidestep the cap, which means landlords should not assume that a specialist lease wording will automatically preserve the economics of an older deal.
The full consultation is available on GOV.UK.
What this means for landlords
- If you own leasehold flats: review whether any ground rent terms were genuinely linked to a reduced premium when the lease was granted or extended.
- Watch for: whether the final bill keeps the exemption narrow or creates a more complex proof test for sales and remortgages.
- Before selling: expect buyers and brokers to ask harder questions about how ground rent terms may change under the new regime.
- For portfolio planning: flat-heavy landlords should treat lease structure as an investment risk, not just a legal detail.
- Bottom line: the cap is still the main policy, but this consultation could decide which older leases keep special treatment.
Editor’s view
This is the kind of technical reform that looks niche until a sale or remortgage turns on it. Flat landlords who ignore lease structure now may end up discovering the real cost later, when a buyer, valuer or lender refuses to wave it through.
Author: Editorial Team – UK landlord & buy-to-let news, policy, and finance
Published: 8 July 2026
Sources: MHCLG, GOV.UK
Related reading: Ground rent cap set for 2027 as flat landlord pressure grows
