Leasehold reform in England and Wales is underway, with the Government proposing changes such as capping ground rent on existing leases and simplifying lease extensions. However, most reforms are not yet law, and there is no fixed commencement date. Until legislation is enacted and in force, conveyancing advice must be based on the lease terms and legal framework that apply today.
One widely reported proposal is a statutory cap of £250 per year on ground rent for existing residential long leases in England and Wales. However, this is not yet law. Until new legislation is passed and brought into force, ground rent remains payable in accordance with the terms of the lease, and buyers must be advised based on the current legal position.
Ground rent has become one of the most controversial aspects of leasehold ownership in England and Wales. Over recent years, buyers, lenders and conveyancers have all faced increasing uncertainty about what ground rent is acceptable, what reforms are coming, and how proposed changes may affect existing leases.
In this article, our residential conveyancing team explains the current legal position, what has been proposed, and what leasehold buyers should understand now, rather than relying on headlines or assumptions.
What Is Ground Rent?
Ground rent is a payment made by a leaseholder to the freeholder under the terms of a lease. Traditionally, ground rent was a modest sum, often £10 or £20 per year. However, over time, some modern leases introduced higher ground rents or clauses allowing the rent to increase aggressively.
Ground rent is separate from service charges and does not usually relate to the cost of maintaining the building.
Is Ground Rent Currently Capped at £250?
There is currently no universal statutory cap on ground rent of £250 per year for existing leasehold properties in England and Wales.
However, the Government has publicly proposed further leasehold reforms, including the introduction of a future cap on ground rent for existing leases, commonly referenced at £250 per year. These proposals have been confirmed in policy announcements but have not yet been brought into force and do not currently have a fixed commencement date.
The figure of £250 is also significant due to its interaction with assured tenancy legislation. Where annual ground rent exceeds £250 outside London (or £1,000 in London), a lease may fall within assured tenancy rules, creating enforcement and repossession risks that concern mortgage lenders.
As a result, lenders already scrutinise ground rent levels and escalation clauses closely, regardless of future reform proposals.
What Has Already Changed in the Law?
The most significant reform already in force under the Leasehold and Freehold Reform Act 2024 is the ban on ground rent for most new long residential leases. For qualifying new leases, ground rent must be set at a peppercorn, meaning effectively zero.
This reform does not automatically apply to:
- existing leases
- lease extensions completed before the legislation came into force
- certain specialist or exempt arrangements
As a result, many buyers are still purchasing properties with ongoing ground rent obligations.
What Has Been Proposed Regarding a £250 Cap?
The Government has proposed further leasehold reform that would cap ground rent on existing residential long leases, with £250 per year being the commonly stated threshold.
Importantly:
- the proposal is not yet law
- implementation details are still awaited
- it is not yet clear how or when the cap would apply in practice
- transitional arrangements have not been finalised
Until legislation is enacted and in force, ground rent obligations under existing leases continue to apply as written.
Buyers should therefore avoid assuming that future reform will automatically resolve existing ground rent issues.
What Does This Mean for Home Buyers Right Now?
Buyers should not rely on expected reform when making purchasing decisions. Instead, they should focus on:
- the current ground rent amount
- how and when it increases
- whether the lease terms are acceptable to mortgage lenders
- the impact on future saleability
The Future of Leasehold Reform
Leasehold reform is progressing, but it is not yet complete. Until new legislation is in force, buyers and sellers must make decisions based on the current legal position, supported by proper conveyancing advice.
Buying or Selling Leasehold Property – How MJV Solicitors Can Help
At MJV Solicitors, lease terms are carefully reviewed to identify problematic ground rent clauses before contracts are exchanged. Whether you are buying or selling a leasehold property, our expert conveyancers are here to make your experience as stress free as possible.
- Call us on 01253 858231
- Visit our website for more information about how our conveyancing team can help.
Leasehold Reform Frequently Asked Questions
What leasehold reforms are already in force?
Most new long residential leases must now be granted at a peppercorn ground rent, meaning no ongoing ground rent is payable on qualifying new leases.
What leasehold reforms have been proposed but are not yet law?
Proposals include capping ground rent on existing leases, simplifying lease extensions, reforming enfranchisement, and broader changes linked to commonhold. These require further legislation before they take effect.
Will leasehold reform automatically change my existing lease?
No. Until new laws are passed and commence, existing leases continue to operate under their current terms.
Should buyers wait for leasehold reform before purchasing?
In most cases, no. Buyers should make decisions based on current law and lender requirements, rather than uncertain future reform.
How does leasehold reform affect conveyancing now?
It increases scrutiny. Solicitors must advise cautiously, explaining both the current legal position and how proposed reforms may, or may not, affect a particular lease in the future.
This article is for general information and does not constitute legal advice.
