What the £250 Cap Means for Leaseholders and Investors
Last year, the Government signalled its intention to reform the leasehold system as part of its wider housing and cost-of-living agenda. In January 2026, that intention took a concrete step forward.
On 27 January 2026, the Government published the draft Commonhold and Leasehold Reform Bill (the Bill) for pre-legislative scrutiny, describing it as a key measure in its manifesto commitment to bring the “feudal leasehold system to an end” in England and Wales.
A central feature of the Bill is the reform of ground rent payable under existing long residential leases.
What is changing: the £250 ground rent cap
Under the proposals:
- Ground rents on existing long residential leases will be capped at £250 per annum
- The cap will apply for a 40-year transitional period
- After 40 years, ground rent will be reduced to a peppercorn (effectively £0)
This reform extends the protections introduced by the Leasehold Reform (Ground Rent) Act 2022, which abolished ground rents for most new residential leases, to leases granted before 2022.
The stated policy objective is to end leaseholders paying “over-the-top bills for no clear service in return”, while addressing the saleability and mortgage ability issues associated with escalating or uncapped ground rent clauses.
The Government estimates that some leaseholders could save more thousands over the life of their lease, and that the reform will help unlock stalled property sales where ground rent terms have made homes difficult to sell or refinance.
Why the ground rent cap is significant
Ground rent has long been a routine feature of residential leases, often payable without any corresponding service and, in some cases, subject to escalating clauses that significantly increase costs over time.
By introducing a statutory cap and a long-term transition to a peppercorn rent, the proposed reform marks a clear shift in how ground rent is treated within the leasehold system. It is intended to reduce financial pressure on leaseholders while addressing wider market issues, including saleability and mortgage lender concerns, by improving certainty and confidence in the residential property market.
Ground rent reform is also intended to address market dysfunction, particularly:
- Flats rendered unsellable due to onerous ground rent clauses
- Mortgage lender reluctance to lend on leases with escalating rents
- Leaseholders trapped in properties with diminishing marketability
How we can help
Chan Neill Solicitors LLP has an experienced residential conveyancing team advising on both leasehold and freehold transactions. We regularly assist clients in navigating regulatory change and its practical impact on property transactions and investment decisions.
What’s next?
In our next article, we will look beyond ground rent and explore other proposed reforms under the Renters’ Rights Act 2025, examining how they may affect landlords, tenants, and the residential property market more broadly.