Ground rents to be capped at £250 under leasehold shake-up

David Fell, lead analyst at Hamptons, said: “In recent years, the financial squeeze on leaseholders has been unprecedented.

“The cost of fire safety reforms, uncapped commercial utility bills, rising employment costs and buildings insurance premiums have all been passed onto leaseholders in the form of service charges, which are up by over a third in the last five years.

“Would-be sellers facing service charges that are much above one-to-two per cent of their home’s value have found it increasingly difficult to sell.

“In recent years, both buyers and mortgage lenders have become increasingly cautious about committing to high or escalating ground rents and service charges, particularly where they seem disproportionate to what they get in return.

“While it is difficult to legislate for service charge reductions, capping ground rents will make a small but important contribution to leaseholders’ pockets.

“Many leaseholders signed up to escalating ground rent clauses without fully understanding the implications, having received limited advice.

“The ground rent cap is likely to mean fewer freeholds sold off purely as cash generating assets, with leaseholders increasingly likely to also own a stake in their own freehold.”