Sir Keir Starmer has also unveiled proposals to ban leaseholds for new flats, with existing leaseholders getting the right to switch to commonhold in a bid to give homeowners greater control over their properties.
Sir Keir Starmer said there is good news for homeowners
@keirstarmer/tiktok/pa media
The proposals are currently under consultation — but what exactly are the Government’s new measures?
Usually paid on an annual basis, your lease will specify how much ground rent you must pay, the frequency of payments and how any future increases will be calculated.
Ground rents were effectively abolished (or reduced to a peppercorn rent) for most new residential leasehold properties in England and Wales in 2022, but remained for existing leases.
London has the highest proportion of leasehold homes of any region in the UK — 38 per cent of its total housing stock, or about 1.4 million individual homes — according to the Land Registry. The majority (95 per cent) of London’s leasehold homes are flats, five per cent are houses.
Average ground rent paid by leasehold flat owners in London is currently £412 a year, according to the English Housing Survey, while average ground rents across England increased over the last five years from £191 to £304 a year.
What are the Government’s new measures?
Ground rents are set to be capped at £250 a year, under reforms that have been published in a draft Leasehold and Commonhold Reform Bill.
Other proposals within the bill include banning the sale of new leasehold flats and giving homeowners greater control over how their buildings are managed.
The Government has said that ground rent will ultimately be reduced to effectively zero after 40 years.
Sir Keir announced the cap in a TikTok video, saying the move would save some leaseholders “hundreds of pounds”.
Starmer said: “That’s really important because the cost of living is the single most important thing across the country.”
The bill will also make it easier for existing leaseholders to convert to commonhold, so occupants would jointly own the ground a flat is built on without an expiring lease.
The Housing Committee will now scrutinise the bill before it makes its way through Parliament, and the cap could come into force by 2028.
The changes follow Labour’s manifesto promises to tackle “unregulated and unaffordable ground rent charges” and to “bring the feudal leasehold system to an end”.
Angela Rayner urged the Government to stick to Labour’s manifesto promise to tackle ‘unregulated and unaffordable ground rent charges’
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There had been fears that the Government could abandon the ground rent cap due to the potential impact on pension funds.
How does it differ from service fees?
While ground rent is a fixed, often annual payment made to a freeholder, service charges are variable fees paid for maintenance, repairs, and management of communal areas.
Ground rent doesn’t provide any direct service, while service charges cover costs like cleaning drainage, insurance and management charges.
Also, while ground rent is typically paid annually, service charges are often paid monthly, quarterly, or in instalments.