Blog | Valuation | Leasehold & Freehold Reform

Leasehold Reform: History in the Making

Published : 28/07/2026 by Emily Norman

With approximately 4.8 million leasehold flats and houses across England, the Leasehold system is currently subject to a period of significant legislative reform. Whilst much of the detail remains subject to secondary legislation, understanding the direction of travel and its implications for value, yield and risk is increasingly important.

The Market Context

The ground rent investment market has faced headwinds as reform has gathered pace. Institutional appetite has become more cautious by the prospect of retrospective intervention to existing ground rents.

What began as a manifesto commitment in 2017 has evolved into concrete legal change, driven by widespread concern over onerous ground rent terms, particularly leases with ground rents doubling every 20 years or less, or escalating clauses, that have rendered some properties highly undesirable to purchase. The Leasehold Reform (Ground Rent) Act 2022 restricted ground rents on new residential long leases to peppercorn, creating a two-tier market.

Since the Ground Rent Consultation in November 2023 the Government has been considering legislating on existing ground rents too, with no compensation to Freeholders.

Many leaseholders are actively deferring lease extensions unless a sale is imminent and a short lease is affecting marketability. The prevailing sentiment is one of wait-and-see: leaseholders anticipate that forthcoming legislation may reduce premiums particularly where an existing lease has an unexpired term of under 80 years.

Three Developments Reshaping the Market

1. The January 2026 Ground Rent Cap

On 27th January 2026, the Government announced that ground rents on existing leases would be capped at £250 per annum for 40 years, before reducing to peppercorn. For investors holding portfolios with ground rents below this threshold, the immediate income impact may be limited but the longer-term trajectory towards peppercorn ground rents maybe clearly signalled. For those with higher or escalating ground rents, the cap represents a direct reduction in contracted income.

Implementation details remain to be confirmed, with 2028 proposed as the target year for capping ground rents. However, a report by the cross party Housing, Communities and Local Government Committee said this should be brought forward to late 2027. Delays are a real possibility, particularly given the prospect of legal challenges from investors seeking to protect their income streams.

2. The Leasehold and Freehold Reform Act 2024 (LAFRA 2024) and the High Court Challenge

The 2024 Act introduced broader structural changes, most notably abolishing the two year ownership requirement before leaseholders can extend their lease or purchase the freehold. However, three critical elements remain outstanding and require secondary legislation including the treatment of marriage value and proposals to cap ground rents at 0.1% of property value in enfranchisement / lease extension calculations, and the potential banning on freeholders’ recovering their valuation and legal costs.

Several Freeholders mounted a High Court challenge last summer which focused primarily on the above three critical elements including the proposed abolition of marriage value — the uplift generated when a lease is extended or a freehold acquired, traditionally shared equally between the leaseholder and freeholder. The High Court ruled in the Government’s favour; however, the Court of Appeal has recently granted five claimants’ permission to appeal the decision. The outcome carries implications for portfolio valuations, particularly for shorter-lease assets where marriage value can be substantial.

Under LAFRA 2024, through secondary legislation, there are also proposals to introduce new deferment and capitalisation rates. This may offer some comfort to landlords if marriage value is abolished as this could result in higher lease extension premiums for a broad group of leaseholders.

3. Commonhold — The Structural Alternative

The Draft Commonhold and Leasehold Reform Bill, published on 27th January 2026, represents the most significant step forward on commonhold to date. Under the proposals, the government intends for commonhold to become the default tenure for new flats, with new leasehold flats effectively banned subject to limited exceptions. For existing leaseholds, conversion would be voluntary, requiring 50% leaseholder consent, down from the previous 100% threshold. The Bill which was subject to consultation, closed on 24 April 2026. Housing Minister Matthew Pennycook has said the ban on the sale of new Leasehold flats is unlikely to come into force until the next election.

The Allsop Perspective

The complexity of this evolving landscape is precisely where specialist expertise becomes critical. Allsop has considerable experience carrying out ground rent valuations for freeholders and investors and acting on lease extension and enfranchisement negotiations for both leaseholders and freeholders, from initial valuation through to settlement as well. Additionally, Allsop’s auction and private treaty teams have considerable experience in the acquisition and disposal of ground rents.

Our depth of experience in advising both Landlords and Tenants on leasehold reform matters gives us a rounded, practical understanding of how the changes affects premiums, yields, and negotiating positions in real transactions. The interplay between potential marriage value abolition, revised enfranchisement premiums, and the ground rent cap creates a valuation environment that demands careful, case by case analysis.

"Allsop has considerable experience carrying out ground rent valuations for freeholders and investors and acting on lease extension and enfranchisement negotiations for both leaseholders and freeholders"

What to Watch

As seen above the leasehold reform story is not yet concluded. There are a number of legislative developments still to come which will provide greater clarity.

Future Legislation will determine whether existing Ground Rents will be capped at £250 per annum and reduced to peppercorn after 40 years.

The Court of Appeal ruling on marriage value, treatment of ground rents in calculations and cost recovery may provide greater clarity.

Commonhold remains on the agenda as a structural alternative, eliminating ground rents, short leases, and the freeholder/leaseholder dynamic entirely.

For ground rent investors and freeholders, the coming years will require active portfolio management, careful valuation, and close attention to a legislative programme that is still being written. Those who take the right advice and manage their portfolios proactively will be best placed to navigate what remains a market in transition.