Ground rent explained and the 2026 leasehold reforms

UK leasehold reforms will cap ground rent at £250, reducing it to zero over time. This change will improve service charge transparency and phase out new leasehold flats in favour of commonhold. In this guide, we explain how these new regulations will bring clearer ownership and lower long-term costs for Indian property investors in London.

For many Indian buyers, the UK property market has long been attractive due to its strong legal framework, global stature and long-term stability. Leasehold ownership, in particular, is a common and widely accepted structure for leasing apartments in London and major cities. Like any other ownership system, a leasehold comes with its own set of regulations; one of these is ground rent. Ground rent can be an unfamiliar term for many overseas investors, even though it is a common part of UK property ownership.

The good news for all Indian buyers is that the UK government is ensuring clear strategies to simplify and modernise leasehold rules. With the draft Leasehold and Commonhold Reform Bill , ground rent and several leasehold practices are now being updated to make ownership more transparent, predictable and aligned with global expectations. This is a positive development for Indian investors who are focused on long-term planning with clarity.

Why ground rent feels unfamiliar to Indian buyers

Indian property investors generally prefer apartments to houses, as they offer shared facilities and ongoing maintenance charges. What tends to confuse some of them is ground rent, as it is unique to the UK system.

In simple terms, ground rent is:

• A small annual payment made by a leaseholder.
• It is paid to the freeholder; the one who owns the land beneath the building.
• This rent is different from service charges and maintenance costs.

Ground rent does NOT cover services or any sort of repairs; it simply is part of the UK’s legal structure of under leasehold ownership. In most cases, ground rent has been typically modest. However, some older leases include clauses under which the amount increases over time. International property buyers raised practical questions around this issue:

• What is the long-term visibility of costs?
• How is the mortgage acceptance structured for future buyers?
• Is resale easy?

These are the areas the new reforms aim to address.

What changed in 2022? And what is further improving?

In the year 2022, the UK government removed ground rent on most new residential leasehold homes, making new-build purchases simpler for buyers. However, for existing leasehold properties, the terms were continued under the original terms. As of 2025, around 3.8 million homes still pay ground rent. The average amount paid was just over £300. Collectively, ground rent payments remained a meaningful long-term cost.

What is being proposed in the 2026 ground rent reforms?

The draft Leasehold and Commonhold Reform Bill represents a measured and structured update, designed to improve buyers’ confidence without disrupting the market.

1. Ground rent cap

Ground rent on existing leasehold homes will be capped at £250 per year and, over time, reduced to a peppercorn level. This regulation will bring certainty and address concerns around future hikes.

2. New flats moving away from leasehold

Most new apartments in London will be sold under commonhold-style ownership; this structure is more familiar to overseas buyers and is a widely used concept globally.

3. Clearer service charges

Service charges will become easier to navigate, easier to question and better regulated. This will further build on reforms already introduced in 2024.

4. Stronger protection for property owners

The removal of forfeiture and the introduction of court-led safeguards provide reassurance, especially for overseas investors managing their properties from afar.

Why do ground rent reforms matter for Indian investors?

Indian buyers usually plan for the long term. The new reforms will support that mindset as existing owners will benefit from clearer costs and a smoother resale process. New buyers will gain confidence and simplicity at purchase.

Buy-to-let investors will see improved lender comfort, tenant confidence and valuation stability. Most importantly, this new regulation will work as a risk-reduction reform and not as a value-eroding one.

Is the new ground rent reform disrupting the market? No.

These changes have been discussed for years and are now being phased in strategically and carefully. London property’s core fundamentals remain unchanged; strong rental demand, limited housing supply, global capital appeal and world-class infrastructure and employment opportunities.

How Benham and Reeves India can help

As London property specialists since 1958, Benham and Reeves has helped thousands of overseas investors navigate the UK property market with confidence. Our India office was established in 2011, led by Mumbai and Delhi who understand Indian investors’ expectations and the structure of UK property ownership.

If you already own a property or are considering buying one in London, our India team can explain how the 2026 reforms apply to your investment and ease the investment process from start to end. Contact our property expert for a no-obligation, one-on-one consultation.