Ground rent change could save you hundreds of pounds a year

People who own leasehold homes could save money thanks to planned government reforms.

If you own a flat, you may have to pay ground rent to the freeholder.

That means you own your home for a fixed number of years, but not the land it sits on, so you pay ground rent every year to live there.

In many cases, these charges have spiralled over the years, putting households under huge financial pressure.

So the government is now confirming that ground rents will be capped at £250 a year.

Over time, that cap will eventually drop to a ‘peppercorn’ rate - essentially nothing - after 40 years.

What is ground rent?

Ground rent is a yearly fee paid by a leaseholder to the freeholder - the person or organisation that owns the land the property is built on.

It’s most common in leasehold flats and is separate from service charges, which cover things like maintenance, insurance and shared repairs.

Ground rents were banned for most new leasehold homes in England and Wales in 2022.

But this didn’t apply to those who already owned leasehold properties, who were left paying existing charges and seeing them go up each year.

Leaseholders ‘will keep more of their money’

The government believes the changes will ensure residential leaseholders no longer have to pay “over the top bills for no clear service in return”.

Instead, they’ll be able to “keep more of their hard-earned cash” - with many seeing savings of around £4,000 over the course of their lease.

Ministers also hope the reforms will benefit those who have been unable to sell their home because excessive ground rents made their property unattractive both to lenders and buyers.

Changes could save households hundreds of pounds, says PM

Prime minister Sir Keir Starmer has hailed the reforms as “good news” for homeowners.

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

“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.”

Housing secretary Steve Reed added that the leasehold system has “tainted the dream of home ownership” for many people.

“We are taking action where others have failed - strengthening home ownership and calling time on leasehold for good.”

What else is changing?

The government also plans to ban the sale of new leasehold flats and scrap forfeiture rules, which currently allow leaseholders to lose their home over relatively small debts.

In addition, a new enforcement regime will be put in place and steps will be taken to make it easier for existing leaseholders to convert to commonhold.

This would give homeowners more of say in how their building is run and influence over management decisions.

I’m struggling to keep up with ground rent - what can I do?

If rising ground rents are putting you under pressure and you’re falling behind, let freeholders and management companies know as soon as possible.

Otherwise, you could face legal action, ultimately leading to repossession.

But there are procedures that freeholders and management companies must follow before they take action against you.

You may also be able to challenge charges if you think they’re unfair.