On the 27th January 2026, the Government announced their plan to implement a cap on ground rent.
But what exactly does this mean for freeholders?
In her latest article Leasehold Specialist, Niki Adkins outlines everything freeholders need to know about the upcoming ground rent cap...
What is Ground Rent?
Ground rent is a payment a freeholder receives from the flat owners in a building of flats as a kind of ‘rent’. It is not for any kind of service; it is purely a benefit the freeholder receives for letting the flats on long leases.
You can read our dedicated article on ground rent here.
What is the new cap on Ground Rent?
On 27th January 2026 the Government announced that it will introduce a cap on what freeholders can collect in ground rents payable under existing leases that reserve a ground rent.
That cap is to be limited to £250.00 a year, with a further suggestion that ground rents will be reduced to a peppercorn (i.e. zero) after 40 years. We don’t presently know when that 40-year period will start from.
When will the £250 cap on Ground Rent come into place?
It is suggested that the cap could start around the end of 2028, but exact timeframes are unknown.
What does the new Ground Rent cap mean for Freeholders?
Essentially, freeholders would not be able to collect anything above £250 a year (per flat), regardless of what the lease states it should be able to collect. Therefore, a freeholder’s annual income could be severely reduced.
A further implication of this could be that the values of freeholds of such buildings (or at least the investor market’s interest in them) are reduced/limited. A similar thing happened when the Leasehold & Freehold Reform Act 2024 (LAFRA) received Royal Assent.
LAFRA intends to reduce the premiums payable for lease extensions/freeholds, but for the most part, has still not been introduced, but impacted the open-market values of freeholds regardless.
What is the right of first refusal?
It would not be surprising to see a flurry of freeholders looking to sell their freehold titles of affected buildings. More often than not, freeholders will be legally obliged to offer the freehold (via ‘Right of First Refusal’ ) to the flat-owners in the building before they can sell it to anyone else.
You can read our dedicated article on the Right of First Refusal here, you can also get in touch with one of our leasehold experts on 01202 499255.
Specialist Leasehold Property Experts
Our specialist lawyers can assist with the Right of First Refusal requirements and the sale of a freehold. We also have a panel of specialist valuers with whom we have worked for many years who can assist with valuing such a freehold.
You can get in touch with one of our expert Leasehold Property Lawyers by calling 01202 499255 or by filling out the form. We offer all new clients a free initial chat.
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