The government’s plans to retrospectively introduce a cap on ground rents could cost the taxpayer over £31bn in compensation, the Residential Freehold Association has warned.

This is due to the compensation pension holders, charities and other institutions that receive ground rent income would be entitled to from their legitimate investments in freeholds.

The association warned that the proposals would therefore hit public finances and drive professional freeholders from the market, creating “zombie buildings”, where there is no freeholder present. This could create greater safety risks for tenants, as in the case of an emergencies residents would not have the support of a freeholder during evacuation of unsafe buildings.

Mick Platt, director of the Residential Freehold Association, said: “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.

“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.

“Spending over £31bn to reduce consumer choice and leave millions of residents with management responsibilities they do not want would be a thundering own goal. The Government has ignored extensive research, including its own, which shows there is simply no desire from a majority of residents, or the public at large, for the policy proposals they are pursuing.

“The government must respect the rights of property owners and ensure any leasehold reform is proportionate and delivers tangible benefits to leaseholders – from managing service charge levels to no new leasehold houses – instead of running a horse and cart through a huge area of investment in the UK economy.”