No new ground rents have been created since 30 June 2022. Everything traded is legacy stock, and on 27 January 2026 the government proposed capping existing residential ground rents at £250 with no indexation, falling to a peppercorn after 40 years. Any valuation built on the passing rent continuing in perpetuity is now a bet on that Bill failing. We will tell you what the income is actually worth, and what else in the reversion still has value.
A reversion yielding on a passing rent above £250 is being valued on income the government has proposed to cap and then extinguish. We model it both ways — on the current terms and on the proposal as drafted — so you are pricing a range rather than a hope.
Where ground rent exceeds £250 a year, or £1,000 in Greater London, and the flat is the leaseholder’s only or principal residence, the long lease can fall within the Housing Act 1988. That disapplies forfeiture and creates mandatory possession risk. Lenders dislike it, and it damages saleability on the units.
The rent is only part of a reversion. Consent and licence income, the reversionary interest itself, management rights and the enfranchisement position all carry value — and some of it is more durable than the ground rent. We separate the components rather than quoting a single yield.
Our fee is paid by the vendor. No acquisition fee and no retainer — and no incentive for us to be optimistic about an asset class under active legislative threat.
Income now, the reversion later, enfranchisement premiums, or a strategic interest in a building you already have exposure to. These are different assets and the proposals affect them very differently.
Review pattern and whether any doubling clause exists, unexpired terms across the units, how many leaseholders are above the £250 or £1,000 threshold, enfranchisement and right to manage risk, and the consent income history.
Two models: current terms, and the proposal as drafted with a £250 cap and a 40-year run-off. If the gap between them is the whole of your return, that is worth knowing before you buy, not after Royal Assent.
The Leasehold Reform (Ground Rent) Act 2022 banned ground rent on new residential long leases in England and Wales from 30 June 2022, extended to retirement housing from 1 April 2023. New leases carry a peppercorn. So no new ground rent income is being created anywhere, and everything that trades is legacy stock — which by itself would make the asset class a run-off rather than a growth market.
On 27 January 2026 the government published the draft Commonhold and Leasehold Reform Bill, and with it a proposal to cap ground rents on existing residential long leases granted before June 2022 at £250 a year with no inflation adjustment, transitioning to a peppercorn after 40 years. The government has indicated the cap could be in force in late 2028, subject to Parliament. The draft Bill is currently in pre-legislative scrutiny before the Housing, Communities and Local Government Committee.
Capping an existing contractual income engages Article 1 of Protocol 1 to the European Convention on Human Rights — the right to peaceful enjoyment of possessions. The government appears to have taken that seriously: the earlier position that freeholders would receive no compensation has been replaced by the 40-year transition, and by a proposed quid pro quo exemption for leases where a higher ground rent was genuinely traded for a lower purchase premium.
That exemption is drawn narrowly. It is expected to require contemporaneous written evidence, third-party scrutiny of the original bargain, and possibly a tribunal declaration — and even an exempt lease would still fall to a peppercorn after 40 years. In practice very few leases will clear it.
A long residential lease granted after the Housing Act 1988 came into force can fall within that Act as an assured tenancy where the rent exceeds £250 a year, or £1,000 in Greater London, and the flat is the leaseholder’s only or principal residence. The consequences are not cosmetic: the usual protections around forfeiture and relief from forfeiture do not apply, and Ground 8 gives a landlord mandatory possession where rent arrears reach the statutory threshold — the court has no discretion.
Lenders understand this and dislike it, which is why ground rents above the threshold damage mortgageability and saleability on the individual flats and why sellers frequently pay for a deed of variation to bring the rent below it. A Housing Act 1988 (Amendment) Bill was brought forward to put it beyond doubt that a long lease of 21 years or more is never an assured tenancy regardless of ground rent, but it is not law. For now the practical remedy remains a deed of variation, negotiated case by case.
The ground rent is the most visible part of a reversion and, on the current proposals, the least durable. The rest is worth separating out. There is consent and licence income — fees for alterations, subletting, deeds of variation and lease extensions. There is the reversionary interest itself, which on short unexpired terms can dominate the valuation entirely. There are management rights, subject to the leaseholders’ right to manage. And there is the enfranchisement premium, which is the part currently in dispute.
Insurance commission used to be a meaningful line for many freeholders. The Leasehold and Freehold Reform Act 2024 provides for buildings insurance commissions to be replaced with a transparent, permitted handling fee, but those provisions are not yet commenced. Treat any historic commission income in a vendor’s figures as a line that is scheduled to disappear rather than as recurring revenue.
It is proposed, not enacted. On 27 January 2026 the government published the draft Commonhold and Leasehold Reform Bill with a proposal to cap ground rents on existing residential long leases at £250 a year with no indexation, falling to a peppercorn after 40 years, potentially in force in late 2028. The draft Bill is in pre-legislative scrutiny. Alongside it, the freeholders’ challenge to the 2024 Act was dismissed in the High Court but has permission to appeal, with a Court of Appeal hearing expected in 2027. So the honest answer is that the direction is clear and the timing and detail are not.
Twice. Once on the current contractual terms, and once on the proposal as drafted — income capped at £250 with no indexation and extinguished after 40 years. The difference between those two numbers is the legislative risk you are being asked to carry, and it should be visible in the price rather than buried in a single yield figure. If the whole of the projected return sits in the gap between the two models, that is a decision about your appetite for the outcome of a Court of Appeal hearing, not a property investment decision.
Because of the Housing Act 1988. Where ground rent exceeds £250 a year, or £1,000 in Greater London, and the flat is the leaseholder’s only or principal residence, the long lease can be an assured tenancy. That removes the usual forfeiture protections and brings in Ground 8, under which a court must order possession where arrears reach the statutory threshold. A lender’s security can be extinguished by three months of unpaid ground rent. A Bill to put it beyond doubt that long leases are never assured tenancies has been brought forward but is not law, so the practical fix remains a deed of variation.
Often, yes, but it is a different asset from the one most people think they are buying. Consent and licence income for alterations, subletting and lease extensions is real and recurring. The reversionary interest itself can dominate the valuation where unexpired terms are short. Management rights carry value subject to the right to manage. What you should discount heavily is insurance commission, because the 2024 Act provides for it to be replaced with a permitted handling fee once commenced, and the ground rent income itself on anything above £250.
That depends entirely on what you are buying them for and at what price, and we would rather say so than talk up the category. The legislative direction has been consistently against the freeholder since 2022 and there is no sign of that reversing. Reversions with short unexpired terms, strong consent income, or a specific strategic purpose can still work on the right numbers. A portfolio bought on a multiple of passing rent above £250, with no discount for the cap or the run-off, is exposed in a way that is not currently priced in most marketing material.
