Labour’s New Leasehold Reform Bill: Big Change or Just Papering Over the...

Labour has unveiled a bold new Leasehold Reform Bill that proposes capping ground rents at just £250 per year from 2028 and banning new leaseholds altogether. The move is designed to tackle one of the most controversial parts of the UK housing market — the expensive and often unfair system of leasehold property ownership that has left thousands of leaseholders burdened with high ground rents and excessive service charges.

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Under current arrangements, many leaseholders struggle with spiralling ground rents that escalate over time, plus unpredictable service charges. Critics argue this mirrors a feudal system and traps homeowners in long leases that erode the value of their homes. Labour claims the new bill will make it simpler for leaseholders to transition to commonhold, a form of ownership akin to freehold where residents collectively own and manage their building.

Labour’s proposals are intended to bring greater fairness and transparency. By restricting future ground rents to a nominal £250 and preventing new leasehold titles, the bill aims to end the creation of leaseholds and protect future property buyers. More controversially, the legislation encourages — but does not fully mandate — existing leaseholders to convert to commonhold. This raises practical questions about how leaseholders with different lease lengths can all switch. Critics warn that without compulsory mechanisms and clear valuation rules, many families may still find it difficult or prohibitively expensive to make the change.

Another key debate centres on how the reforms will affect freeholders’ asset value. Freeholders range from private owners to institutions and estates with significant property portfolios. For example, the Duke of Westminster’s estate, which holds high-value freeholds in Mayfair and Belgravia, could see the future value of those assets reduced if new leaseholds can no longer be created and if conversions proceed without compensation mechanisms.

Will Labour’s Leasehold Reform Bill slash asset values for major freeholders, or will it, like the 2025 Conservative Leasehold Reform Act, simply “paper over the cracks” of a broken system? The effectiveness of the bill will depend on detailed implementation, protections for existing leaseholders, and the legal frameworks that govern commonhold conversions. For many leaseholders, hope remains that meaningful reform could finally deliver a fairer property market.

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