Proposed leasehold reforms in the UK, which include the introduction of a cap on ground rents, could result in a compensation cost of over £31 billion to taxpayers, according to analysis by the Residential Freehold Association.

The compensation claims are likely to come from investors, such as pension holders and charities, who receive ground rent income from their legitimate investments in freeholds.

The association argues that the proposed reforms will not only affect public finances but will also drive professional freeholders from the market, leading to “zombie buildings” with no freeholder presence, creating safety risks for residents.

Association director Mick Platt says: “It’s astonishing to see a British government consulting on the retrospective interference with the legitimate rights of property owners in this way and it sets an alarming precedent for UK plc.

“[Housing Secretary] Mr Gove’s department has gone way beyond any reasonable attempt to reform the leasehold system and has consistently ignored calls for regulation. Instead, they have proposed a raid on investors that would hit the public finances and leave leaseholders in the lurch.”

The House of Commons Library has published a report on this that can be seen here.

Additionally, a Impact Assessment by the Government states that freeholders face £27.3bn loss in asset values if ground rents are reduced to peppercorn, says government today in its impact assessment of the options to reform. Over the first ten years, setting ground rents to zero would dry up ground rent income to the tune of £5.1bn.

The full impact assessment can be read here:

https://www.leaseholdknowledge.com/wp-content/uploads/2023/12/GroundRentReformImpactAssessment.pdf

Or here from the department’s website:

https://www.gov.uk/government/publications/consultation-impact-assessment-modern-leasehold-restricting-ground-rent-for-existing-leases