The Draft Commonhold and Leasehold Reform Bill has landed (via TikTok)!

On Tuesday this week, the Government announced the draft Commonhold and Leasehold Reform Bill (via TikTok) which claims to ‘bring forward reforms designed to modernise, strengthen and reinvigorate the commonhold and leasehold framework’.

Collectively, the Bill’s proposals represent a fundamental shift in how property ownership and management in the residential sector will operate. By limiting financial burdens, rebalancing enforcement powers and promoting alternative ownership structures, the Bill seeks to address the long-standing criticisms of our leasehold system and to place greater control in the hands of homeowners.

What is Commonhold?

Commonhold is a form of freehold ownership that enables homeowners (typically in flats and apartments) to have a stake in the ownership of their buildings. This provides owners with enhanced control over how their buildings are run as they have ownership of their unit and control over shared areas.

This system therefore means that the trappings associated with our leasehold system, such as ground rents, are removed and that there is no “lease term ” to decrease, arguably making property ownership more straightforward and certain for owners of commonhold units.

Commonhold first came into force in 2004 (Commonhold and Leasehold Reform Act 2002). However, there are currently only a handful of commonhold developments. In essence, this new Bill repeals and replaces the existing commonhold legislation in order to revive it as the tenure of choice for flats and mixed use developments.

What does the Bill introduce in relation to commonhold?

New leasehold flats banned

The most significant change is banning leasehold as the tenure for most new flats (including those created through conversion and redevelopment) once a workable commonhold regime is established. The Guidance published alongside the Bill is highly critical of the existing leasehold framework, drawing attention to its draconian features and entrenched power imbalances.

Therefore, the Bill includes measures to prospectively ban the use of leasehold for new flats (where a lease over 21 years would have been granted), supported by the launch of a consultation entitled “Moving to commonhold: banning leasehold for new flats”. The consultation seeks industry views on the practicalities of the transition and closes on 24 April 2026.

Some leases will still be allowed such as some shared ownership leases and home finance plan leases.

Mixed use buildings and commonhold

Another significant change is that the Bill allows a building to be “sectioned” to allow commonhold in mixed use buildings. This aims to address one of the main issues with the previous implementation of commonhold in mixed use buildings. The new proposed system means that commercial areas can be managed separately from residential areas within a commonhold structure.

Lenders and funders

Addressing further concerns with the previous attempt at introducing commonhold, the Bill provides for enhanced enforcement powers; commonhold associations will be able to apply for an order to sell a flat where there are service charge arrears enabling them to realise the assets necessary to maintain buildings and services.

Conversion of current leasehold ownership to commonhold ownership is permitted with the consent of only 50% of qualifying leaseholders.

The current commonhold legislation requires 100% consent from all leaseholders, freeholders, and lenders to convert a building to commonhold. This made it very difficult to implement and this change is intended to make it easier for existing leaseholders to transition to commonhold. The Bill also contains details as to how to deal with leaseholders that do not agree to convert, with proposals to harmonise their rights and obligations with those of the commonhold unit owners.

What does the Bill introduce for remaining residential leasehold properties?

The top three changes for leasehold properties are arguably:

1 – Capping ground rents at £250 a year, reducing to a peppercorn after 40 years

The Government believes this will address onerous ground rents, such as those that double after a period of years. It is also considers that this should unlock property sales as rapidly increasing ground rents can make properties difficult to sell or mortgage. The Competition and Markets Authority (CMA) has often highlighted ground rent abuses, and this move aims to prevent them.

However, this change could affect the valuation of property portfolios where ground rent yields form an important component, representing a serious loss to some landlords even with the 40 year runway to zero ground rents.

2 – Abolishing the current forfeiture regime and introducing a fairer enforcement system

Instead of forfeiture there will now be a new “fairer” statutory enforcement scheme. This aims to prevent landlords taking back possession of a property over minor breaches.

3 – Regulating estate rent charges

Some remedies for breaching rent charges, such as the rent charge owner being able to gain possession or grant a lease where there are arrears, have been removed. There are now also new notice provisions and once in force more proportionate methods of enforcement will need to be followed.

The way forward

The direction of travel is now clear. However, the Bill is in draft form and following the consultation, the Bill is likely to be amended before it goes through the various stages of parliament in the usual way.

This Bill represents one of the most substantial overhauls of property ownership in decades.  Developers, lenders, investors, current leaseholders and freeholders therefore need to consider these potential changes now.

We will continue to closely monitor the reforms as they progress.

Read the Bill and additional Explanatory Notes and Guidance here: Draft Commonhold and Leasehold Reform Bill. If you wish to respond to the consultation you can find the link here.

Our expert team is on hand to answer any questions you may have. Please get in contact.