The Labour Party government, under Sir Keir Starmer, has confirmed plans to cap ground rents in England and Wales at £250 per year. This cap is intended as a first step towards eliminating ground rents entirely over the next 40 years. However, concerns have been raised that some leaseholders could still face higher charges under certain exemptions.
The government consultation, launched prior to Starmer’s anticipated departure as Prime Minister, suggests that “quid pro quo” leases might be exempt from the cap. These leases involve buyers agreeing to pay increased ground rents in exchange for a reduced purchase price or cheaper lease extensions.
Shadow housing secretary Sir James Cleverly criticized the proposal, labeling it a “glaring loophole” that could undermine protections for leaseholders. He warned that Labour’s approach risks enabling freeholders and landlords to exploit leaseholders once again.
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Katie Kendrick from the National Leasehold Campaign echoed these concerns, highlighting that the consultation focuses on a small fraction of leaseholders—potentially less than one percent—rather than addressing widespread sector issues impacting the majority.
Ground rents are recurring charges leaseholders must pay to freeholders, often without receiving services in return. These fees are part of the outdated leasehold system, which many view as feudal. The proposed cap aims to address affordability challenges immediately, while simplifying transactions in the leasehold property market. Eventually reducing ground rents to a negligible “peppercorn” sum will effectively end most residential ground rent payments.
Harry Scoffin of Free Leaseholders condemned the move as “the final insult to leaseholders from the Starmer Government,” pointing to ongoing frustrations within the leasehold community.
Legal expert James Carpenter from Forsters law firm highlighted potential pitfalls: while a simple cap could negatively impact freeholders who made agreements in good faith, a more complex exemption system might leave loopholes for exploitation.
A Ministry of Housing, Communities and Local Government spokesperson defended the consultation, assuring that any exemptions would be strictly limited to voluntarily negotiated leases and safeguarded against misuse or avoidance.