The government has announced plans to reform the leasehold system in England and Wales, with millions of leaseholders expected to be affected. Under the proposals, ground rents would be capped at £250 a year before reducing to a peppercorn rate after 40 years.

The plans were outlined by prime minister Sir Keir Starmer in a video published on TikTok this morning, in which he said the changes could reduce costs for some households. The proposals also include a ban on new leasehold flats and legislation intended to give homeowners greater control over their properties.

Over 5 million leaseholders and future homeowners will benefit from stronger control, powers and protections, through the draft Commonhold and Leasehold Reform Bill published today, which will fundamentally rewire homeownership across England and Wales.

It will cap ground rent at £250 a year before ultimately reducing it to a peppercorn after 40 years – marking the end of residential leaseholders paying over the top bills for no clear service in return.

The government estimates that this move will save some leaseholders more than £4,000 over the course of their lease. This will also unlock house sales for leaseholders whose lives have been put on hold because of ground rent terms that make their homes hard to sell.

Starmer said: “Good news for homeowners, we’re capping ground rent at £250. That means if you are a leaseholder, and your ground rent is more than £250, you’ll be paying less.

“And I’ve spoken to so many people who say this will make a difference to them of hundreds of pounds.

“That’s really important because the cost of living is the single most important thing across the country.

“So this is a promise that we said we’d deliver and I’m really pleased that we’re delivering on that promise.”

Secretary of state for housing Steve Reed commented: “If you own a flat you can be forced to pay ground rents that can become completely unaffordable. We said we’d be on the side of leaseholders – which is why today we are capping ground rent – helping millions of leaseholders by saving them money and giving them control over their home.

“The leasehold system has tainted the dream of home ownership for so many. We are taking action where others have failed –strengthening home ownership and calling time on leasehold for good.”

Forfeiture, whereby leaseholders can lose their home and the equity they built up by defaulting on a debt as low as £350, will also be abolished and a new enforcement regime will rebalance the system.

A new process to make it easier for existing leaseholders to convert to commonhold will also be introduced under a revamped commonhold model where homeowners will receive a stake in the ownership of their buildings and be given a stronger say in the issues that affect them, with greater control over how the building is managed and the bills they pay.

The reinvigorated commonhold system will ensure it works for all types of developments, as well as mortgage lenders, with strong management rules in place around repairs and leadership, and greater rights for homeowners.

Those living in the building will have a say in the annual budget and how the building is run, and new protections when things go wrong. Current leaseholders will also be given the opportunity to switch to commonhold, where the majority of residents agree to it.

The reforms build on action currently being undertaken by the government to implement the Leasehold and Freehold Reform Act 2024, including increased transparency over service charges so that leaseholders can better hold their landlords to account.

This comes as the government passed through its landmark Renters’ Rights Act.

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