For this special election episode of Good Landlording, Richard Jackson and Suzanne Smith pick apart the pledges that the political parties make in their general election manifestos for leasehold reform in England and Wales. (This episode does not apply to Scotland or Northern Ireland, where the law is different).

This episode is useful for all leaseholders, not just landlords who own leasehold flats and houses.

Suzanne and Richard explain what ground rent is, why it’s become controversial, the reforms to date, and where the various parties stand on capping existing ground rent.

Both Labour and the Conservatives specifically promise to move to commonhold, and Suzanne goes through the differences between commonhold and the existing freehold and leasehold structure. They also discuss plans to end the misuse of forfeiture and so-called “fleecehold” estate charges.

As always, it’s a practical episode, which helps landlords who own leasehold properties, like Richard, understand how the reforms may affect them, whoever wins the general election. It expands many of the issues they discussed in #10: Tips to help landlords self-manage their buy to lets.

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Overview of leasehold reforms to date

According to Official Statistics from 2022-23, there are 4.77 million leasehold properties in England, which is almost 20% of the English housing stock. Of these, 38% (or 1.8 million individual properties) are privately owned and let by landlords in the private rented sector.

As there are 4.6 million properties in the PRS (English Housing Survey 2022-23), 39% of properties in the PRS are leasehold.

Leasehold reforms have been a long time coming. Theresa May’s government consulted on “tackling unfair leasehold practices” in 2017, and the Conservatives’ 2019 manifesto promised to “continue” leasehold reforms including restricting ground rent to a peppercorn and banning the sale of leasehold houses.

The Leasehold Reform (Ground Rent) Act 2022 and the Leasehold and Freehold Reform Act 2024 started the reforms in that ground rent for new leases was abolished and the sale of new leasehold homes was banned, but ground rent for existing leases was not restricted.

The Leasehold and Freehold Reform Act, when implemented, will bring in a lot of reforms. It promises to make it easier and cheaper for leaseholds to extend leases up to 990 years, and buy out the freehold in the case of houses and a share of the freehold for flats.

>> Blog post: Practical Guide to the Leasehold and Freehold Reform Act 2024

Capping ground rent

What is ground rent?

Ground rent is a sum of money which the owner of a leasehold property, a flat or a house, pays each year to the owner of the freehold,  and the freeholder, who does nothing in return for it. 

Freeholders don’t provide any services for ground rent. The leaseholder pays for any services and maintenance through service charges, which is a separate mechanism.

What’s the meaning of a peppercorn ground rent?

A peppercorn ground rent does literally mean the payment of a peppercorn, which is a form of valid consideration (payment in legalese). It’s also used as a synonym for a small sum such as £1 or 1 penny.

Ground rent can vary from this sort nominal value to a significant amount that increases over the term of the lease, eg by reference to inflation or to a formula whereby the ground rent doubles every x years.

Ground rent is an obligation under the lease and the leaseholder must pay it on the due date.

Ground rent reform to date

The Leasehold Reform (Ground Rent) Act 2022 abolished ground rent for leases granted on or after 30 June 2022. The only permitted rent is a “peppercorn rent”, which Section 4(3) of the Act states is “one peppercorn”.

However, ground rent remains in place for existing tenancies, although some developers have agreed to cap t