27 Jan What the new ground rent cap means for you
On 27 January 2026, the Government confirmed it will cap ground rents at £250 per year for existing leasehold homes in England and Wales. It’s a major step in leasehold reform aimed at reducing costs for owners and making properties easier to sell.
Under the Government’s proposals set out in the draft Commonhold and Leasehold Reform Bill, ground rents will be:
- Capped at a maximum of £250 a year for existing leases, and
- Gradually reduced to a nominal “peppercorn” (effectively zero) after 40 years.
These changes are expected to be introduced in legislation over the next few years and could come into force in late 2028, subject to parliamentary approval and the normal legislative process.
For leaseholders, this cap will help ease financial pressures and make homes with high or escalating ground rents more attractive to sell or remortgage. For landlords and investors, it’s important to review portfolios and plan for how the cap might affect future income and valuations.
What does the ground rent cap mean for homeowners?
The proposal will make it much easier for leaseholders who have been trapped because of ground rent terms, to sell their property. If you are a leaseholder, and your ground rent is more than £250, you’ll be paying less. New leasehold flats will also be banned.
- Marketability restored – If your home was previously “un-sellable” because of a spiralling ground rent clause, the £250 cap effectively acts as a reset button. It brings your property back into the “safe zone” for high-street lenders.
- The 40-year horizon – The transition to a peppercorn rate means the long-term value of your home is no longer being eroded.
- The forfeiture safety net – Perhaps most importantly, the Bill proposes to abolish forfeiture. This means you will not lose your entire home and equity over a debt as small as £350.
What does the ground rent cap mean for landlords & investors?
The proposal will directly impact the long-term yield projections and asset valuations of freeholders across the country. While the Government’s move toward a £250 cap and eventual “peppercorn” status aims to simplify the market, it also requires landlords to be proactive now. Managing your exposure effectively means moving from “passive collection” to “active mitigation.” For instance, if you own a block where 50 leaseholders currently pay £500 a year, your annual revenue is about to be halved, and the capital value of that asset will shrink accordingly.
Proactive landlords are already auditing their portfolios to identify where their “Debt Exposure” is highest.
To manage this shift effectively, you should consider:
- Valuation sensitivity – The “multiplier” effect of compounding ground rents has been a key driver for freehold valuations. With the £250 cap acting as a hard ceiling and a 40-year transition to zero, you need to immediately reassess the book value of your assets. The market will likely begin pricing in these compressed yields long before 2028.
- Portfolio audits – Now is the time to identify which assets in your portfolio are most vulnerable. Leases with doubling clauses or high RPI-linked rents will see the most significant impact. Segmenting your portfolio by “risk to yield” will allow for more informed decisions on whether to hold, divest, or restructure.
- Debt covenants – If your freehold is leveraged, a drop in valuation could trigger a breach of your Loan-to-Value (LTV) covenants. By identifying these “at-risk” assets today, you can decide whether to divest while there is still market liquidity or renegotiate terms with lenders before the 2028 deadline.
- A shift to management value – As ground rent ceases to be a primary income driver, the value of the freeholder role will shift toward professional estate management and service delivery. Successful landlords will be those who can pivot their business models to provide high-quality, transparent management services that justify their role in the property ecosystem.
The goal for the industry now is to find a path toward “certainty.” By understanding the legislative timeline and auditing your exposure today, you can mitigate the impact of the cap and reposition your capital for a more service-led future.
Late 2028 might seem like a long way off, but we know it will come around quickly. The time to plan your next move whether that’s selling, extending, or auditing is now.
For more information
- Commercial leases – expert legal advice for landlords and tenants
- Commercial property sales and purchases
- Residential property – take full control of your leasehold property – leasehold enfranchisement
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