UK Leasehold Shake Up Promises Major Homeowner Relief

In a sweeping overhaul of the homeownership landscape, the UK Government has unveiled a set of landmark reforms to the leasehold system, capping ground rents at £250 per year and promising a future where millions of leaseholders gain unprecedented control over their homes. The announcement, made on January 27, 2026, signals a decisive attempt to clamp down on what ministers have described as “scams” that have left homeowners across England and Wales paying steep, often inexplicable fees just to live in their own properties.

The reforms, introduced in the draft Leasehold and Commonhold Reform Bill by Housing Minister Matthew Pennycook, aim to end the centuries-old leasehold system that critics have long decried as feudal and exploitative. Under the new rules, ground rents will not only be capped at £250 annually for most residential contracts entered before July 2023, but after a 40-year transition period, these charges will be reduced to a peppercorn—effectively zero.

“I’ve spoken to so many people who say this will make a difference to them worth hundreds of pounds,” said Prime Minister Sir Keir Starmer in a video posted on TikTok. “That’s really important because the cost of living is the single most important thing across the country.”

For new developments, the changes are even more radical: the sale of new leasehold flats will be banned, with commonhold set to become the default model. Unlike leasehold, where homeowners must pay ground rent to a freeholder who may provide little or no service, commonhold grants full ownership of the flat and shared ownership and management of the building itself. This, the Government claims, will finally give homeowners the control and transparency they have long demanded.

“Leaseholders across the capital will be celebrating this historic bill. Runaway service charges and ground rents will be a thing of the past,” said Joe Powell, MP for Kensington and Bayswater. “The desperately needed end to this feudal system is now in sight for millions of people across the country.”

Existing leaseholders will also have the right to convert their properties to commonhold, a move intended to ensure that current homeowners are not left out of the new system. The reforms further include measures to make service charge bills clearer and more transparent, making it easier for residents to challenge unfair costs. Forfeiture—the rule allowing homeowners to lose their homes over debts as small as £350—will be abolished and replaced by a new, court-led process with strict safeguards for only the most extreme cases.

But not everyone is celebrating. The campaign group Free Leaseholders, which had pressed for ground rents to be reduced to zero immediately, accused the Government of “betraying hardworking leaseholders to protect the ground rent grifters and offshore property mafia.” In a statement, the group said, “Let’s be clear, freezing ground rents or even capping them at £250 per annum keeps leasehold on life support. It would be the opposite of ending leasehold, which is what the [Labour’s] manifesto promised.”

Harry Scoffin, founder of Free Leaseholders, told LBC that while the cap was a step in the right direction, it was not “necessarily the win” being touted. “Many of our supporters say that ground rent isn’t the issue, it’s the crazy service charges,” he noted, highlighting ongoing concerns about costs that can spiral well beyond ground rent itself.

Service charges and major works costs remain a sticking point for campaigners, who argue the reforms fall short of tackling the full range of financial pressures faced by leaseholders. The reforms do, however, require service charge bills to be standardized and clear, and empower residents to challenge unexplained hikes or mystery fees. The government is also looking at making resident-controlled management the default for new-build estates, addressing the widespread problem of ‘fleecehold’—where freehold homeowners are hit with excessive estate charges for the upkeep of parks, roads, and shared areas.

The Competition and Markets Authority (CMA), which has led a crackdown on mis-selling and unfair leasehold terms since 2019, welcomed the new proposals. “Our action has freed thousands of homeowners from doubling ground rents, and we have long supported a cap on ground rents to make sure all leaseholders get the fair deal they deserve,” said CMA chief executive Sarah Cardell. “We welcome the Government’s proposals, so people won’t have to struggle against these rising fees anymore—particularly when many are already grappling with high costs elsewhere.” The CMA’s interventions have already helped more than 21,000 leaseholders across the UK, according to its own figures.

Yet the reforms have drawn sharp criticism from the other side of the property divide. The Residential Freehold Association (RFA), representing professional freeholders, called the ground rent cap “wholly unjustified” and warned it could “seriously damage investor confidence in the UK housing market and send a dangerous and unprecedented signal to the wider institutional investment sector.” The RFA added, “Property rights and contract law are fundamental drivers of domestic and global investor confidence in the UK. Instead of focusing on those reforms which address the issues that leaseholders care most about, the Government’s draft Bill will tear up long-established contracts and property rights, which are pillars of the UK’s investment reputation.”

Communities Secretary Steve Reed, MP for Streatham and Croydon North, was blunt in his assessment of the old system, describing ground rents as “scams” and “rackets.” He told Times Radio, “If you own a flat, you’re a leaseholder, you have to pay ground rent to an individual organisation, even though they’re not providing you with any service at all. The amount that you pay is uncapped, so you can pay through the nose more and more money year after year, you don’t know how much it’s going to be.”

While the Government has chosen not to offer compensation to freeholders under the new regime, a previous impact assessment suggested that compensation could have exceeded £27 billion—a figure the RFA cited in its objections.

Legal professionals are also sounding notes of caution. The Society of Licensed Conveyancers (SLC) welcomed the capping of ground rents and the abolition of forfeiture, but warned that the proposed large-scale transition to commonhold tenure “carries significant legal and practical risks if introduced too quickly.” The SLC pointed out that commonhold places management and financial decision-making directly in the hands of homeowners, many of whom lack experience in governance, raising the risk of disputes, delays, and financial uncertainty. There are also unresolved questions about mortgage lender confidence and the complexity of conveyancing under the new system, with new title structures, automatic Land Registry changes, and transitional arrangements all increasing the risk of error and consumer confusion.

The SLC is urging the Government to proceed with caution, calling for “meaningful engagement with conveyancers, clear and standardised documentation, robust transitional safeguards, and investment in education for both professionals and the public.”

As the draft Leasehold and Commonhold Reform Bill heads to Parliament, the stakes could hardly be higher. The Government’s promise to finally end the “feudal” leasehold system has set off a fierce debate about fairness, property rights, and the future of homeownership in Britain. Whether these reforms will deliver on their bold promises—or create a new set of challenges—remains to be seen, but for millions of homeowners, change is finally on the horizon.