Millions of UK leaseholders – including a large cohort of buy-to-let landlords – will see ground rents capped at £250 a year under sweeping reforms announced by the government on Tuesday, a move expected to unlock stuck flat sales and reshape leasehold investment across England and Wales.
The policy forms part of the draft Commonhold and Leasehold Reform Bill, published today (27 January 2026), which ministers say will fundamentally rewire flat ownership and begin a long-term shift away from the leasehold system.
UK ground rent cap and landlord impact
Under the proposals, existing residential ground rents will be capped at £250 a year, before being reduced to a peppercorn rate after 40 years. The government estimates many leaseholders could save more than £4,000 over the lifetime of a lease.
Announcing the change, Prime Minister Keir Starmer said the cap would make a tangible difference during a prolonged cost-of-living squeeze. He said he had spoken to leaseholders for whom the reform would mean savings of “hundreds of pounds”, adding that tackling household costs was the government’s “single most important” priority.
For landlords, the immediate significance lies less in annual savings and more in market mechanics. Escalating ground rent clauses have become a major obstacle to mortgage approvals and sales, particularly where lenders require variations before agreeing finance.
Tom Goodman, managing director of the Goodlord platform, said the cap would be welcomed by landlords facing rising costs across the board. He noted that escalating ground rents had “penalised this class of landlord and created an additional incentive for them to sell up – something the market can ill-afford given current supply pressures”.
Leasehold reform bill and the move towards commonhold
The draft Bill goes further than ground rents alone. New leasehold flats will be banned outright, while existing leaseholders will be given a clearer, cheaper route to convert to commonhold, where residents collectively own and control their building.
Housing secretary Steve Reed said leasehold had “tainted the dream of home ownership for so many”, arguing that some flat owners were being forced to pay charges that became “completely unaffordable” over time.
The reforms will also abolish forfeiture – the right of a freeholder to take back a flat, and all equity within it, over debts as low as £350. A new statutory enforcement regime is promised as a replacement, with further detail expected during the Bill’s scrutiny.
Liam Spender, the lawyer behind the Leaseholder Action claim, said the £250 cap would “make it cheaper for people to buy the freehold and to extend their leases”, while also improving saleability and mortgage access for flats previously held back by ground rent terms.
Market reaction and investor considerations
Industry bodies broadly welcomed the clarity provided by the draft legislation, while warning that the transition will need careful handling.
Justin Young, chief executive of RICS, said the publication of the draft Bill was a “critical step”, offering greater certainty around long-awaited leasehold reforms.
Propertymark also pointed to long-standing evidence that escalating ground rents undermine transactions. Timothy Douglas, head of policy and campaigns, said research from member agents consistently shows that leasehold properties with rising ground rents “struggle to sell, even if priced correctly”.
However, concerns have been raised about the impact on institutional freeholders. Danny Pinder, director of policy at the British Property Federation, warned the cap would affect pension-backed investments made in good faith and risk increasing the premium investors attach to UK property unless compensation and implementation are handled carefully.
Editor’s view
Capping ground rents removes one of the most corrosive features of the leasehold system, particularly for landlords caught with otherwise sound flats rendered unsaleable by technical clauses. But it also underlines a wider shift: regulatory risk is now a permanent feature of UK property investment. For buy-to-let investors, adaptability – not nostalgia for old structures – will determine who thrives next.
Author: Editorial team – UK landlord & buy-to-let news, policy, and finance
Published: 27 January 2026
Sources: UK Government draft Commonhold and Leasehold Reform Bill; Prime Minister’s statement; RICS; Propertymark; Goodlord; British Property Federation
Related reading: Buyers pay steep premium for freehold property as leasehold reforms lag
