Written evidence submitted by the Residential Freehold Association (RFA) [CLR 178]
About the RFA
The RFA is the representative organisation for the UK’s largest professional freeholders, responsible for circa one million leasehold properties. Its members have called for statutory regulation of the sector since 2018 and adhere to a strict Code of Practice.
Foreword
The RFA welcomes the Committee’s call for evidence. However, we are concerned that pre-legislative scrutiny of the draft Bill is being rushed, and that the sequencing risks undermining good policy-making. The Government has not yet published an Impact Assessment. Without this analysis, stakeholders are being asked to respond without sight of the underlying assumptions on market impacts. The RFA therefore requests that, once the Impact Assessment is available, the Committee allows stakeholders an opportunity to submit supplementary evidence.
1.1. The draft Bill is the product of a policymaking process that has failed to engage with evidence from the market as a whole. The measures included within this draft will do nothing to address the real-world issues regarding unregulated property managers and the broader rising cost of homeownership. This would be better addressed through the implementation of the solutions put forward in Lord Best’s report on the Regulation of Property Agents.
1.2. The legislation fails to address issues that leaseholders have consistently raised – including rising service charges, regulating best practice and fixing unsafe buildings. Instead, the legislation will increase costs for homeowners, remove the oversight of professional freeholders who have been driving the remediation process, and leave homeowners who opt to convert to commonhold exposed to liabilities and responsibilities.
1.3. While leasehold has historic origins, it has evolved into a well-established and legally robust system for managing multi-occupancy developments and resolving competing interests between stakeholders. Framing the system as “feudal” oversimplifies its current function and risks directing policy attention toward structural overhaul rather than targeted reform of identifiable problems. The Government has not addressed the fundamental contradiction that it is trying to legislate freeholders out of existence by expropriating their assets – handing them over in most instances to other categories of investor or landlord, whilst still relying on freeholders to ensure the remediation of buildings.
1.4. This unprecedented interference with property rights risks creating years, if not decades, of uncertainty for consumers while it deals with the vacuum resulting from the forced exit of professional freeholders.
1.5. The Bill does not address minority leaseholders who do not wish to convert but may find themselves within commonhold structures with reduced protections.
1.6. The policy objectives are unlikely to be achieved, as the incremental benefits that commonhold is said to offer over existing, well-established and widely understood mechanisms and protections have neither been clearly identified nor evidenced. As a result, uptake is likely to remain low.
1.7. The proposed cap on existing contractual ground rent will result in an immediate loss in value of freehold investments, including significant pension fund assets, which, given typical leverage levels and interest cover covenants, may create a material risk of insolvency for some freeholders.
2.1. The Government has never evidenced or defined the conditions under which it considers a ground rent to be ‘unaffordable’ or ‘unregulated’. This rhetoric has created the foundations for a flawed policy. We expect the cap and the resulting insolvency of freeholders to lead to higher day-to-day costs for homeowners.
2.2. This stems from a failure to recognise that ground rent is a contractually agreed payment forming part of the property’s consideration. Its level and review mechanism are fixed by the lease and cannot be varied unilaterally.
2.3. No evidence has been produced to show that current ground rents are “unaffordable”. Yet in exchange for this cap, leaseholders will be faced with landlord insolvency.
2.4. The CMA’s investigation into ground rent estimated that 13,000 leases were sold by developers where the ground rents had doubled more frequently than every twenty years. Following collaboration between industry and government, the Public Pledge for Leaseholders led to the vast majority of these leases being successfully varied to remove those doubling clauses. The number remaining (4,430 as of 2023) continues to fall and represents less than 0.1% of all leases. Within RFA member portfolios, all leaseholders covered by the Public Pledge have been contacted and offered the opportunity to remove the clauses identified as onerous.
2.5. Beyond the retrospective and likely unlawful appropriation of property rights, there is potential under these proposals for service charges to increase by significantly more than the average £54 saving in ground rent. This is due not only to the risk of freeholders becoming insolvent and leaseholders losing the economies of scale that professional freeholders can bring to negotiations with developers, insurers and managing agents, but also to the removal of a professional, capitalised counterparty with long-term oversight of the building. Without such oversight, leaseholders may become more dependent on managing agents, with reduced leverage to hold them to account, increasing governance costs and instability.
2.6. Another fundamental misunderstanding that has underpinned MHCLG’s decision to cap ground rent is that ground rent over £250 causes mortgageability issues. This is not only demonstrably untrue, but a cap will make mortgages harder to attain, given that according to UK Finance’s Mortgage Lenders’ Handbook lenders look to the presence of a solvent entity who can uphold the lease covenants when making lending decisions.
2.7. The UK’s major lenders do not have an issue with ground rent that exceeds the figures utilised by the Government – 0.1% of a property’s value or £250. The UK Finance Mortgage Lenders’ Handbook makes clear that most lenders have a policy in place where they will lend on a property with ground rent up to 0.5% of a property’s value. Where ground rent is considered materially above market norms or increases on an atypical basis, lenders may undertake enhanced review or impose specific conditions rather than declining lending outright.
2.8. As noted in the High Court’s hearing of a judicial review of the Leasehold and Freehold Reform Act 2024 (Day 1 transcript, page 152, paragraph 21), evidence was produced showing Nationwide Building Society’s position on ground rent, which was that it has not caused mortgageability issues across its lending portfolio and that it does not consider ground rent below 0.5% of the property value to be onerous. The average value of a flat in England is c.£220,000, which suggests a corresponding passing ground rent of £1,100 would not impact mortgageability. For higher value flats this would be a higher figure.
2.9. One historical anachronism within the Housing Act 1988 created an unforeseen situation where ground rents exceeding £250 (or £1000 in Greater London) could impact lender security (the “assured tenancy trap”). This issue influenced lenders’ policies but has now been resolved by the Renters’ Rights Act 2025.
2.10. The impact of damaging and conflicting government rhetoric around ground rent has created uncertainty in the market and driven mortgage lenders’ policy.
3.1. The proposal to cap existing ground rent represents a wholly unjustified and unprecedented interference with the property rights of investors. Ground rent assets are held by institutional investors, including pension funds, to match long-term liabilities. Around £15 billion of pension fund capital is invested in ground rents.
3.2. The level of ground rent and the mechanisms by which it can increase are clearly set out in legally binding lease agreements, agreed at the point of sale between developers and original purchasers. A cap that prevents ground rents from being reviewed on the terms agreed, or reduces them, would retrospectively rewrite these contracts and fundamentally alter the value of lawful investments made in good faith.
3.3. In many instances, this cap will represent a direct pensioner-to-investor wealth transfer. In England and Wales, non-UK-based landlords and buy-to-let investors make up 41% of leaseholders – excluding social housing, this share rises to 43%.[1] This risks transferring value from domestic pension investment to overseas property investors, contrary to the Government’s stated aim of protecting homeowners.
3.4. Investor confidence has already been weakened by the rhetoric surrounding these proposals, discouraging long-term capital investment and prompting several funds to suspend trading amid political and regulatory uncertainty. Any retrospective intervention in established legal contracts would further undermine the assumptions underpinning investors’ decisions and introduce a new level of political risk into pension and investment portfolios, directly affecting millions of pension holders, charities, insurers and lenders, and undermining confidence not only in the leasehold sector but across the wider UK investment market.
4.1. The draft Bill will make the resolution of serious lease breaches significantly less effective for all tenures and management structures, including third party investor freeholder and resident management schemes such as RTM or RMC. The ability to enforce payment of service charges and other lease obligations is relied upon not only by freeholders but also by resident-led management companies and service charge managers, whose ability to recover debts on behalf of all residents may be materially reduced.
4.2. Forfeiture represents an absolute last resort to enforce lease covenants and to ensure service charge funds required for the running of a building are paid and services maintained for the benefit of all residents. The concern historically associated with forfeiture relates to the potential for windfall gain. The RFA emphatically opposes any windfall outcome and supports safeguards to ensure that any surplus value, net of properly incurred costs, is returned to the leaseholder.
4.3. In practice, physically forfeiting a property is exceptionally rare. Across the RFA, it occurs only in single-figure cases each year and is typically associated with abandoned properties. Over a 10-year period, there have been approximately 55 cases of forfeiture across the RFA members’ combined portfolios, representing just 0.0076% of properties.
4.4. The Government’s proposed removal of forfeiture represents a disproportionate response to a legal enforcement mechanism that is used to protect other leaseholders (particularly where criminality is involved). The Government could instead, for example, introduce statutory regulation by enshrining best practice that is adhered to by professional freeholders including the transfer of equity less costs to the previous owner, ensuring that freeholders are unable to receive a windfall.
4.5. The existence of forfeiture provides an ultimate enforcement backstop which is not only relied upon by freeholders and other leaseholders but also provides mortgage lenders certainty that there is a route to guarantee the ongoing viability of the building and therefore their security.
4.6. The removal of forfeiture is likely to have unintended systemic consequences for the administration of justice. In the absence of a definitive enforcement endpoint, disputes may be more likely to progress through multiple stages of tribunal and court proceedings, including repeated debt claims and enforcement applications. This risks increasing both the volume and duration of litigation.
5.1. As a priority, the RFA believes the Government must focus on areas which have been consistently cited by leaseholders as needing reform. The Government’s research into leaseholder perspectives shows the vast majority have positive or neutral perceptions of leasehold as a tenure.[2] Meanwhile, service charge is consistently cited as a key concern. The small minority that expressed a desire to take over management of their own block did so under the impression that their service charges would somehow be “slashed” – despite service charge being a tenure agnostic aspect of multi-occupancy living.
5.2. RFA members have advocated for the regulation of managing agents since the publication of Lord Best’s ROPA report in 2019, which will improve transparency and accuracy in service charge statements. All managing agents should be required to hold membership of a regulatory body that promotes professionalism and high standards and has the power to enforce against its members when these are not met. A register of managing agents should also be created - this would be consistent with other regulatory/redress systems.
5.3. In addition, all managing agents should have a mix of qualified and accredited employees to ensure they have the knowledge and technical ability required to provide a good service to residents. Implementing a licensing system would be beneficial, allowing managing agents to be certified at different levels based on their expertise.
5.4. Achieving the above measures will not align with the draft Bill and the impacts of landlord insolvency following a ground rent cap. Managing agents act under instruction from the freeholder. Insolvency would therefore create immediate uncertainty over who has authority to give instructions, whether contracts remain valid, and whether managing agents can lawfully continue operating.
6.1. The Committee needs to be clear on the incompatibility of this Bill with existing building safety legislation. A ground rent cap will drive into insolvency the very parties which the Government is relying on to deliver building safety remediation. The remediation programme currently covers approximately 9,000 to 12,000 buildings and carries an estimated cost of between £12.6 billion and £22.4 billion.[3] Widespread insolvency among professional freeholders would place delivery of this programme at immediate risk.
6.2. Under the Building Safety Act 2022, freeholders play a critical role in commissioning, funding and overseeing remediation works, as well as entering into and complying with Government-backed Grant Funding Agreements (GFAs). Insolvency removes a freeholder’s ability to contract, pre-fund works or fulfil statutory and contractual obligations, even where remediation funding is theoretically available. Contractors will not work for an insolvent landlord, leading to the immediate suspension of cladding remediation and other safety-critical works.
6.3. As a result, statutory responsibilities increasingly fall back onto leaseholders, many of whom are unable to fund or help oversee remediation personally. This leads to prolonged non-compliance, stalled remediation, heightened building safety risks and people unable to sell and move on.
6.4. International and domestic experience demonstrates that transferring responsibility for complex, safety-critical buildings to collective resident governance structures can carry material delivery risks. In Scotland, where residential leasehold was abolished and flat owners are collectively responsible for maintenance and repair, research by the Royal Institution of Chartered Surveyors indicates that approximately 50% of tenement buildings require some form of repair, with around 28% classified as being in critical disrepair.[4]
6.5. In the context of buildings with existing safety defects, replacing professional freeholder oversight with resident-led governance - particularly during an active national remediation programme - risks compounding delay, increasing legal disputes and undermining delivery certainty at a time when regulatory stability is essential.
7.1. When a freeholder becomes insolvent, the impact is immediate and cascading. Freeholders sit at the centre of the legal, financial and operational framework that keeps residential buildings safe, insured and functioning. Their removal disrupts that framework rather than replacing it. This will impact on supply, valuation and the lending decisions that allow leasehold to provide a dynamic form of tenure, that feeds into the wider UK property market.
7.2. With the average tenure of a leaseholder being around 7 years, the presence of a freeholder ensures that there is a party dedicated to the long-term oversight of the building, reducing short-term administrative burdens while ensuring long-term maintenance.
7.3. As referenced in 2.6, lenders look to the presence of a professional freeholder when making lending decisions to provide assurances on the security of their loan. Professional freeholders support tens of thousands of flat transactions each year in this regard. While the building safety crisis has been a critical impediment on lending, Government misconceptions have led it to focus exclusively on ground rent removal as a panacea.
7.4. Independent economic analysis from WPI suggests that a retrospective £250 ground rent cap could reduce the value of ground rent assets by up to £18.7 billion in current prices. Such a shock, concentrated in a single asset class, would not simply redistribute value but could introduce wider instability into financing structures that underpin residential development and management. Modelling indicates that even modest increases in required investor returns (in the region of 10–30 basis points) could reduce annual housing starts by between 1% and 10%, undermining delivery at a time when supply is already materially below target. The impacts would also be geographically uneven, with 55% of the ten-year effects falling on London and the South East - precisely the regions facing the greatest affordability pressures and most fragile development viability[5].
7.5. The consequences would extend beyond freeholders. Pension funds are estimated to hold in excess of £15 billion in residential ground rent assets, potentially around half of the total market. According to analysis from WPI, the basis of the previous Government’s own impact assessment, this could translate into valuation reductions of £9–£10 billion for pension savers, at odds with wider efforts to mobilise institutional capital into UK housing and infrastructure. Where portfolios are leveraged, a sudden reduction in expected income could also trigger covenant stress and forced asset sales, creating operational disruption and uncertainty in building management, insurance and safety oversight. Rather than resolving underlying affordability challenges, the draft Bill therefore risks weakening investment confidence and destabilising established funding arrangements.
8.1. The RFA advocates the provision of consumer choice. However, proposals to force an alternative tenure upon the property market through retrospective interference in UK contract law set a dangerous precedent which has raised the concerns of lenders and investors. The wider property sector benefits from the presence of experts that can oversee transactions, provide regulatory and safety assurances, while delivering economies of scale. By forcing an exit of the entities that deliver this, increased levels of uncertainty and risk will be introduced to lending decisions, valuations and insurance coverage.
8.2. For UK property investors, who are driving investment to achieve the Government’s housebuilding targets and under the Mansion House Accord, retrospective intervention in established legal contracts will undermine the assumptions underpinning their investment decisions and introduce a new level of political risk into pension and investment portfolios, undermining confidence not only in the future of commonhold and the multi-occupancy buildings sector but across the wider UK investment market.
February 2026
[1] Centre for Public Data, ‘New data on property in England & Wales owned by overseas individuals’, June 2023.
[2] DLUHC, ‘Perspectives on living in and looking after shared buildings’, July 2023
[3] Committee of Public Accounts, ‘The Remediation of Dangerous Cladding’, March 2025
[4] RICS, ‘Working Group on Maintenance of Tenement Scheme Property’, January 2019
[5] WPI, ‘Economic risks and unintended consequences of a retrospective ground rent cap’, February 2026