What the Leasehold and Freehold Reform Act 2024 Means for Freehold Owners, and Why 2026 Could Be the Year to Sell
If you own a freehold – whether you’re a developer who retained the title after selling off flats, or someone who inherited or acquired a freehold interest, recent legislation has materially changed the value of what you hold. Here’s what’s happening, in plain English.
What is a freehold, and why does ground rent matter?
When flats are sold on long leases, the freeholder typically retains ownership of the building and land. In many cases, the leases include a ground rent, an annual payment from each leaseholder to the freeholder. For developers who built and sold blocks of flats, these ground rent income streams were often retained as long-term investments. A freehold with multiple leaseholders paying ground rent is a tradeable asset, bought and sold just like any other investment property.
What has changed?
Two pieces of legislation have reshaped this market:
The Leasehold Reform (Ground Rent) Act 2022 banned ground rents on new residential leases. From June 2022, any new lease must be granted at a peppercorn (effectively zero) ground rent. This ended the ground rent model for new developments.
The Leasehold and Freehold Reform Act 2024 goes further, affecting existing leases. The key changes for freehold owners are:
- A £250 ground rent cap is expected for existing residential leases in England (£100 in Wales). Once the commencement order is made – expected in 2028 – ground rents above £250 become unenforceable regardless of what the lease says. Doubling clauses and escalation clauses that would push rent above the cap will be effectively neutralised.
- Leaseholders can now enfranchise more easily. The two-year ownership rule will be abolished, meaning a leaseholder can seek to buy the freehold or extend their lease almost immediately after purchase. The threshold for collective enfranchisement in mixed-use buildings will also be raised, bringing more buildings into scope.
- Lease extensions will increase to 990 years at zero ground rent. When implemented, this removes the reversionary value that freeholders have traditionally relied on at the end of a lease term.
What does this mean in practice for freehold owners?
If your freehold income relies on ground rents above £250, or on doubling/escalating clauses, that income is at risk once the cap commences. If your leaseholders are likely to enfranchise – collectively buy the freehold – they now have an easier path to do so, potentially at valuations that reflect the new legislative landscape rather than the old one.
For developers holding retained freeholds: the asset you retained as a long-term income stream has a shorter runway than it did five years ago. Many are choosing to sell now, while valuations still reflect current income levels, rather than wait for further legislative tightening.
For accidental or single freehold owners: if you own a freehold and weren’t sure whether it was worth selling, the answer is that the market is active right now and buyers are paying fair prices, precisely because motivated sellers are bringing stock to market ahead of the cap.
Should you sell your freehold now?
There is no universal answer, it depends on the income yield, the number of units, the current ground rent levels, and how close your leaseholders are to enfranchising. What is clear is that the factors that have historically supported freehold valuations are being progressively eroded by legislation, and that trend is not reversing.
We buy freeholds and ground rents of all sizes, from single-unit titles to multi-block portfolios. If you’d like to understand what your freehold is worth in the current market, we’ll give you a straightforward assessment with no obligation.