Leasehold reform delayed to next year as ground rents cap pledge faces scrutiny

The government has pushed back the publication of the Draft Commonhold and Leasehold Reform Bill, delaying it past the end of this year. In a letter to Florence Eshalomi, chair of the Housing, Communities and Local Government committee, Housing Minister Matthew Pennycook said the bill would not be published before the Commons Christmas recess and that scrutiny would begin in the new year.

According to Pennycook's letter, the bill would make it easier for existing leaseholders to convert to commonhold and would ban the use of leasehold for most new flats. It would also abolish the threat of forfeiture, which allows a freeholder to reclaim a lease and seize equity when leaseholders fail to pay service charges or ground rent, and it would repeal certain powers over estate charges on housing estates. Pennycook said the draft bill would be published in the new year for MPs and peers to scrutinize.

Reacting to the delay, Eshalomi said the failure to publish the draft bill before year-end was deeply disappointing. She cautioned that the delay could complicate reforms during this Parliament, which runs to 2029, and she urged that ground rents for existing leases be addressed.

Campaigners and lenders have warned that ongoing ground rents, some tied to inflation, can escalate annually or in longer cycles, leaving some flat owners exposed and potentially harming mortgageability. "Buyers are increasingly wary of purchasing flats with monetary ground rents and lenders’ attitudes are becoming more conservative," said Harry Scoffin, founder of Free Leaseholders, describing the market risk. He and others have argued that a cap on existing ground rents remains a central test for whether reforms will deliver real relief for leaseholders.

Some experts say the government may be bending to pressure from freeholders and Treasury concerns about the retroactive effect of capping or abolishing ground rents. A spokesperson for the Residential Freehold Association warned that retrospective interference with ground rents could trigger widespread insolvency among professional freeholders and push the Building Safety Act 2022 responsibilities onto leaseholders if recontracts are required. The association also argued that such changes could wipe out investments held by pension funds and institutional investors, with the government citing a potential £27 billion cost to the exchequer to compensate for unlawful interference with existing property contracts.

Leasehold campaigner Harry Scoffin has said the delay suggests the government may have moved away from its manifesto pledge to cap existing ground rents, or at least to deliver the reform within the current Parliament. He argued that the letter from Pennycook omits any explicit commitment to a ground rents cap and that such a omission fuels concerns among leaseholders and lenders alike. Earlier this year, a High Court ruling dismissed a significant legal challenge from major freeholders against the part of the reforms intended to make lease extensions and freehold purchases cheaper, but no new update on enfranchisement reform had been provided as of the latest developments.

Industry observers note that while the government has banned ground rents on new flats, the fate of existing leases remains central to the broader reform agenda. With the Parliament scheduled to run until 2029, the timeline for delivering meaningful relief to millions of leaseholders remains uncertain. In the meantime, buyers and lenders continue to monitor the government's next steps as lawmakers await the draft bill in the new year.