Labour accused of creating 'loophole' in £250 ground rent cap as some leaseholders could pay more

Some leaseholders could end up paying more than Labour's promised £250 ground rent cap under new proposals that critics say create a major loophole in the Government's reforms.

The plans have sparked warnings that certain homeowners could miss out on one of Labour's flagship leasehold protections, leaving them exposed to higher ground rent payments.

Labour has come under fire after publishing consultation documents suggesting some lease arrangements could be exempt from the planned £250 annual ground rent cap.

The Government announced last year that ground rents in England and Wales would be capped at £250 a year, before eventually falling to zero over the following 40 years.

However, the consultation indicates that so-called "quid pro quo" leases could be excluded from the cap.

These are arrangements where buyers agree to pay higher ground rents in exchange for a lower purchase price or a cheaper lease extension.

Critics warn the exemption could create a major loophole, allowing some freeholders to continue charging higher ground rents and leaving leaseholders worse off.

Sir James Cleverly, the shadow housing secretary, described the proposals as "a glaring loophole that risks undoing the very protections leaseholders have been promised by this Government time and again."

He added: "Labour cannot be allowed to create fresh opportunities for unscrupulous freeholders and landlords to exploit leaseholders."

The Conservative frontbencher's intervention adds to mounting pressure on the Government over its handling of leasehold reform.

Labour had previously pledged to abolish what it termed the "feudal system" within 100 days of entering office, but this commitment was abandoned and draft legislation has faced repeated delays.

Campaign groups have reacted furiously to the consultation, accusing ministers of capitulating to freeholder lobbying interests.

Katie Kendrick, of the National Leasehold Campaign, said: "The NLC is very concerned the Government wants to consult on an issue which potentially impacts less than one per cent of leaseholders rather than focus on dealing with the issues which affect 99pc of the sector."

Harry Scoffin, of Free Leaseholders, described the move as "the final insult to leaseholders from the Starmer Government."

He warned that such an exemption "would not only nobble the proposed £250 ground rent cap but also blow up enfranchisement measures in the Leasehold and Freehold Reform Act 2024."

Legal experts have acknowledged the complexity of the issue. James Carpenter, of Forsters law firm, noted that while a straightforward cap could harm freeholders who entered previous agreements in good faith, "too much complexity could leave a chink in the armour of the ground rent cap which could open the door for potential abuse."

A Ministry of Housing, Communities and Local Government spokesman defended the consultation, stating: "We're clear that any exemption would be strictly limited to these voluntarily negotiated leases, and would come with strong safeguards to prevent misuse or avoidance of the cap."