A government proposal suggests capping ground rents in existing long residential leases at £250 per year for 40 years, before reducing them to a peppercorn. This measure is estimated to transfer between £10 billion and £12.7 billion from freeholders to leaseholders.
The proposal is expected to immediately benefit approximately 770,000 to 900,000 homes, with 3.8 million homes potentially affected over time. Homeowners with flats previously subject to doubling ground rents or aggressive review clauses, which made their properties difficult to mortgage or sell, are identified as clear beneficiaries.
However, the cap may also benefit purchasers who knowingly accepted higher ground rents for lower prices, and investors. The cap's uniform application means it cannot differentiate between harmful rents and those that are merely inconvenient, potentially impacting cheaper homes more significantly.
Freeholders will see a substantial part of their freehold's economic value removed by this legislation. Leaseholders who previously bought their own freehold through collective enfranchisement, or paid premiums to extend leases and reduce rents, may find the value of their acquired assets reduced or receive the same outcome as neighbours without the upfront cost.