But the reforms now appear caught in a tug-of-war between some ministers and the Treasury, which is reportedly concerned about the impact of a cap on pension funds which own freehold properties. <\/p>\n
Millions of leaseholders could be affected by the outcome of this struggle, while MPs and campaigners warn that backing down from the policy could spark a rebellion in Parliament.<\/p>\n
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Let\u2019s unpack the reforms \u2013 and how pension funds could cause ministers to scrap them.<\/p>\n
What was promised<\/p>\n
The Conservative Party effectively ended ground rents for most new-build, leasehold homes in 2022. <\/p>\n
However, in their 2024 election manifesto, the Labour Party went further \u2013 and promised to \u201cact where the Conservatives have failed and finally bring the feudal leasehold system to an end\u201d.<\/p>\n
Here are the details of the Government\u2019s proposed reforms:<\/p>\n
Tackle \u201cunregulated and unaffordable\u201d ground rent charges for existing leaseholders by instituting a cap, meaning there would be a legal limit on how much freeholders can charge each year, regardless of what the original lease says;<\/p>\n
End the practice where homeowners on private estates are forced to pay high, unregulated maintenance fees for communal areas;<\/p>\n
Scrap the \u201cmarriage value\u201d fees applied when renewing a lease. Properties with short leases are worth less than those with long leases, so extending a lease increases the property\u2019s value. Under current law, leaseholders must give the freeholder half of that increase in value \u2013 known as the \u201cmarriage value\u201d \u2013 which can add tens of thousands of pounds to the cost of renewal.<\/p>\n
Why it matters<\/p>\n
It is estimated that there are almost five million leasehold homes in England alone \u2013 which are home to millions of people. <\/p>\n
These leaseholders \u2013 who don\u2019t, unlike freeholders, own the property and land permanently \u2013 pay expensive ground rents that can rise over time, making homes harder to sell or remortgage.<\/p>\n
Leaseholders must pay this fee on top of a service charge and their mortgages. <\/p>\n
Some particularly problematic leases allow freeholders to double ground rent every 10 years, causing bills to run into tens of thousands of pounds over time. These have in some cases forced leaseholders into financial ruin and made homes impossible to sell<\/a>.<\/p>\n One leaseholder from Salford told The i Paper that doubling ground rent meant their charges had gone up from \u00a3250 a year to \u00a3500 and then \u00a32,000. The flat itself was bought for \u00a3125,000. <\/p>\n Another said that her ground rent would reach more than \u00a31m a year in 50 years\u2019 time without a cap.<\/p>\n What leasehold reform means for pension funds<\/p>\n Ministers had been looking at capping what freeholders can charge at a maximum of \u00a3250 a year.<\/p>\n But, Treasury officials are understood to be pushing for this cap to be dropped over concerns this would affect pension funds that own freehold properties.<\/p>\n Britain\u2019s leasehold-freehold homeownership system means that blocks of flats, in particular, are owned by freeholder landlords. Some of these are major institutional investors, others are backed by pension funds.<\/p>\n The Residential Freehold Association \u2013 the trade body for freeholders \u2013 estimates that pension funds have invested more than \u00a315bn in residential ground rents, and the total value of investment in UK ground rents is thought to be close to \u00a330bn.<\/p>\n Pension funds often invest in freeholds because ground rents offer predictable, long-term income. Funds need to pay retirees for decades, and ground rents are attractive because they are legally enforceable, backed by land and property, and often linked to inflation, providing a relatively low-risk income stream.<\/p>\n Labour\u2019s proposed reforms could sharply reduce the value of these assets \u2013 and subsequently have a major impact on the returns of some pension funds.<\/p>\n The freehold sector has argued that these changes amount to retrospective interference with property rights. Pension-backed funds and Freehold Associations took a case to court last year, claiming that reform unfairly targets long-term investments.<\/p>\n However, in October 2025, the High Court dismissed a \u00a35m judicial review brought by freeholders, including pension-backed funds. <\/p>\n The Court ruled that Parliament is entitled to reform leasehold law in the public interest, even if it affects investors. <\/p>\n Is this the next Labour rebellion?<\/p>\n The pledge to cap ground rents appears to have become caught in a wider internal Government row. <\/p>\n![\"Estate](\"https:\/\/www.newsbeep.com\/il\/wp-content\/uploads\/2026\/01\/SEI_264233966.jpg\")
The Government has promised to cap ground rents and abolish costly \u201cmarriage value\u201d fees for homeowners (Photo: Jason Alden\/Bloomberg via Getty Images)<\/p>\n
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