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Speed up £250 cap on leasehold ground rent, MPs urge
TL;DR
MPs are urging the UK government to expedite the £250 cap on ground rents for leaseholders, currently set for late 2028, to late 2027. The call comes as leaseholders have faced long delays in addressing this issue.
Key points
- MPs urge faster implementation of £250 ground rent cap
- Current cap implementation expected by late 2028
- Committee suggests moving the date to late 2027
- Leaseholders have faced long delays in reforms
- Around five million leasehold homes exist in England and Wales
A planned £250 cap on yearly ground rents paid by leaseholders in England and Wales should be introduced more quickly, a committee of MPs has urged.
The government has said it expects the limit on ground rents - an annual fee paid by leaseholders to their freeholder - to come into force in late 2028.
However, a report by the cross-party Housing, Communities and Local Government Committee said this should be brought forward to late 2027, arguing leaseholders have waited too long for successive governments to tackle the issue.
The government said it was bringing forward legislation "as an urgent priority" to bring the leasehold system to an end in this Parliament - which could run until 2029.
There are around five million leasehold homes in England and Wales, where people own the right to occupy a property via a lease for a limited number of years from a freeholder.
As well as capping ground rents, the government's draft Commonhold and Leasehold Reform Bill, which is being scrutinised by the committee before it is introduced to Parliament, would ban the sale of new leasehold flats.
It also aims to make it easier for people to convert to commonhold, where people jointly own and take responsibility for their buildings without an expiring lease.
Ground rents are paid for the right to occupy the land on which a building sits and are separate to service charges, which cover the management and maintenance of a building.
The English Housing Survey estimated that in 2023/24 the average annual ground rent was £304 a year.
However, it is common for ground rents to double or increase by RPI 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 under the previous Conservative government, but remained for existing leasehold homes.
Under the current draft version of the bill, the £250 cap would come into effect on a date decided by ministers.
The government has said it expects this to be in late 2028, but it could happen sooner if the bill progresses more quickly.
Instead, the committee wants the cap to come into force two months after the bill passes into law, which it said could be in late 2027.
The government is also promising to reduce ground rents to a peppercorn rate - effectively zero - after 40 years.
The committee said it was unclear why this transition period could not be shortened to 20 years.
Some freeholders and investors have argued they need more time to adjust and plan for the change.
But the committee's report said it was not convinced by this argument, given successive governments had indicated their intention to cap ground rents since at least 2017.
The government has argued a 40-year transition is a "balanced, achievable and realistic timeline", with a shorter period carrying a greater risk of legal challenge.
Q&A
What is the proposed cap on ground rents for leaseholders in England and Wales?
The proposed cap on ground rents for leaseholders is £250 per year.
When is the government planning to implement the ground rent cap?
The government plans to implement the ground rent cap by late 2028, but MPs are urging it to be brought forward to late 2027.
How many leasehold homes are there in England and Wales?
There are approximately five million leasehold homes in England and Wales.
What is the role of the Housing, Communities and Local Government Committee in this issue?
The Housing, Communities and Local Government Committee is advocating for the expedited introduction of the ground rent cap, citing delays faced by leaseholders.
