Property experts have warned the latest wave of leasehold and commonhold reform, including a £250 ground rent cap, threaten to deter investment coming into the UK.

Earlier today (27 January), the government published a draft version of its new Commonhold and Leasehold Reform Bill (CLRB), which aims to ban new leasehold flats and reduce ground rents to a peppercorn rate by 2028.

The government will also set out a new commonhold model to make it easier for existing leaseholders to transition to that tenure, with a new consultation launched seeking views on the details of the leasehold ban.

Danny Pinder, director of policy at the British Property Federation, welcomed moves to address the “rapidly escalating ground rents”. However, he warned that the cap will “interfere with investments made by pension funds and institutional investors over many years and undermine the government’s pursuit of investment in this country”.

“There are elements within the commonhold proposals that responsible freeholders will support, including reforms to the funding of major works,” Pinder added.

“However, the management of buildings is complex and the introduction of commonhold needs to be carefully phased to ensure the market, including conveyancers, lenders and managing agents can fully understand the changes and their implications.”

The sentiment was shared by Scott Goldstein, property litigation partner at law firm Payne Hicks Beach, who agreed the cap will “interfere with investments in freeholds built up by pension funds over many years”.

“The new rules will not allow enforcement for unpaid ground rent, or for small amounts of other unpaid charges such as service charges,” he said.

“As with the removal of no-fault evictions, the government says landlords will be protected by the courts. However, this offers little reassurance given court staff shortages and long delays. In practice, these reforms are unlikely to have much impact.”

Caroline Wild, counsel (real estate disputes) at law firm Forsters, said the bill may not be the “silver bullet leaseholders are hoping for”, claiming commonhold is “still a form of communal living and a lot of the challenges leaseholders face under the current system will persist under a new tenure”.

“Careful consideration needs to be given to the legal and practical aspects of how commonhold can be implemented in complex developments, especially in schemes with a mix of residential and commercial space.”

Gary Scott, Property Litigation Partner at law firm Spector Constant & Williams, claimed the cap will only impact a “small minority of leaseholders, likely less than 25% of all those with a ground‑rent obligation”.

“Current government estimates indicate that around 770,000 to 900,000 leaseholders pay more than £250 per year, out of approximately 3.8 million leasehold properties that still carry a ground‑rent charge,” he said.

“While this means the vast majority of leaseholders will see no direct financial change from this measure, for the much smaller group of leaseholders still burdened by onerous, doubling, or investment‑linked ground rents, the impact will substantial.”