Leasehold reforms become law but without ground rent cap

Reforms to leasehold and freehold in England and Wales have become law – but without a promised cap on ground rents.

The new law aims to make it cheaper and easier for more people to extend their lease, buy their freehold and take over management of their building.

But plans to remove ground rent for existing leaseholders or cap it at £250 have been dropped.

The Leasehold and Freehold Reform bill was one of the last pieces of legislation to make it through Parliament on Friday before it was shut down for 4 July’s general election.

Levelling Up Secretary Michael Gove – who has announced he is standing down as an MP at the election – had originally wanted to cap ground rents at nominal level.

That was changed to a planned £250 cap – but the idea was dropped altogether as the legislation was rushed into law at the last minute on Friday evening.

A ground rent is paid by owners of leasehold properties on top of their mortgage, with some facing high charges and unexpected increases which can make homes difficult to sell.

But the owners of freehold properties had campaigned hard against the ground rent cap and other measures in the bill arguing it would harm the value of their investments and some companies have threatened to sue the government for interfering with their property rights.

Labour’s shadow housing minister Matthew Pennycock said his party would “finish the job of finally bringing the archaic and iniquitous leasehold system to an end”.

“Having waited so long and had their expectations raised so high, leaseholders across the country will be bitterly disappointed at the Tories’ failure to enact bold leasehold reform,” he added.

Speaking as the leasehold bill was being rushed through the House of Lords on Friday, Tory peer Lord Bailey of Paddington said: “This bill is suboptimal, it’s not the revolution that many leaseholders across the country have been desperate for.

“But it’s the only game in town, a game that has currently taken 22 years to get to this point.”

Other Tory peers accused the government of “rushing through” the legislation.

The Renters Reform Bill, which was expected to pave the way for an end to section 21 no-fault evictions, has been axed.