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What the Leasehold and Commonhold Reform Bill Means for Residential Buyers, Homeowners, Landlords and Investors
Hailed as the most significant change in property ownership since William the Conqueror divided up land into parcels after 1066, the draft Commonhold and Leasehold Reform Bill means huge change on the horizon for residential buyers, homeowners, landlords and investors in England and Wales, the last developed countries operating under this feudal system.
“The change to commonhold is really significant for everyone who owns a flat or everyone who might own a flat in the future. That is a really fundamental change in the rules governing homeownership,” Professor Nick Hopkins, who leads work at the Law Commission to advise governments on leasehold reform, told The Times last month.
Flats are more likely than houses to be leasehold, with more than 3 million (3.28m) leasehold flats in the private sector in England alone, according to the government.
There are 1.35m leasehold houses in England too, the government says, plus 235,000 leasehold residential properties in Wales.
If the Draft Commonhold and Leasehold Reform Bill, announced on January 27, 2026, comes to pass, all this could change. Leasehold ownership of property, where a freeholder holds the power, will disappear in favour of commonhold, which gives all owners in a building or development equal sway.
Key Takeaways
- The bill received Royal Ascent in May 2024: This means the Act is passed and is now law in England and Wales, however it is being implemented in stages with the government consulting consumers and property experts during the gradual rollout.
- Commonhold will become default tenure: Leasehold will be banned in new developments, with commonhold taking over as the default tenure. Homes built exclusively for rent, such as in Build-to-Rent (BTR) schemes, will remain leasehold.
- Ground rents will be capped: Ground rents in most new leasehold properties were prohibited under The Leasehold Reform (Ground Rent) Act 2022. The new legislation will be capping ground rents – attached to leaseholds existing from before July 2023 - at £250 a year, gradually reducing to ‘peppercorn’ of a couple of pounds or zero, after 40 years.
- Existing leaseholders can convert from leasehold to commonhold: It will become easier for homeowners in a leasehold-held building to change to commonhold. Just 50 per cent of leaseholders would need to agree for commonhold to go ahead. Swapping tenures currently requires 100 per cent agreement from all leaseholders, mortgage lenders and the freeholder.
- Ending forfeiture of lease: A lease can be subject to forfeiture, meaning the landlord takes it back, with the homeowner facing legal action to retain their home. Just one missed ground rent or service charge payment of £350 could trigger lease forfeiture proceedings.
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Why has the Commonhold and Leasehold Reform Bill happened now?
Leasehold and freehold reform in favour of commonhold is not new. It was first introduced in England and Wales more than two decades ago, through the Commonhold and Leasehold Reform Act 2002, with supporting regulations appearing in 2004. But commonhold reform “failed to gain traction for a variety of reasons”, the government says.
The legislation wasn’t robust enough to tackle the well-entrenched leasehold system, for instance, and bringing commonhold into complex situations, such as mixed-use buildings, proved difficult.
“There are fewer than 20 commonhold developments in existence today and the 2002 legal framework is hopelessly outdated”, says Matthew Pennycock, Minister for Housing and Planning.
Instead, a homeowner leaseholder who wanted more security and control over their home and building would typically apply for a share of the freehold.
Pressure to reform the archaic ownership of land in England and Wales has been building for several years. The system was set by the Normans; all land was owned by the Crown, granted down by complex tenancies and tenures, which could be sold and traded.
In the 18th and 19th centuries, particularly in major cities such as London, landed estates built residential properties, but retained ownership of the valuable land by selling them on a leasehold basis, free to set ground rent and impose lease terms.
First Phase of Leasehold Reform
The last Conservative government tackled ground rent with the Leasehold Reform (Ground Rent) Act 2022. Then along came The Leasehold and Freehold Reform Act 2024 which improved leaseholder rights.
These included allowing leaseholders to extend their leases to 990 years with zero ground rent, removing ‘marriage value’ – which took into account the amount a property had increased in market value - from lease extension calculations, and abolishing the requirement that leaseholders must have owned their property for two years before extending a lease or purchasing the freehold.
Transparency on Service Charges
The Leasehold and Freehold Reform Act 2024 also introduced greater transparency around service charges, forcing landlords and managing agents to be more accountable. This included making bills for service charges clearer and easier to understand, reducing mystery fees or unexplained hikes in service charges and help for homeowners challenging unfair service charges.
This practice, nicknamed ‘fleecehold’ is being phased out.
Some of the important provisions of The Leasehold and Freehold Reform Act 2024 still require secondary legislation so they can be thoroughly implemented. This is where the new Commonhold and Leasehold Reform Bill comes in, making these changes workable and taking leaseholder rights much, much further.
How does Leasehold Work?
Leasehold homeowners do not own their homes outright. They own a lease, which is time-limited. When the lease ends, it typically reverts to the freeholder, unless the homeowner is able to extend it or buy out the freeholder.
Lease terms are usually onerous and difficult to alter. The building and in the case of new leasehold houses, the surrounding land, is owned by the freeholder. This leaves leaseholders with little say over how these are managed, looked after or changed.
How does Commonhold Work?
Commonhold is full freehold ownership of your property. It means you own your own home outright and any common parts jointly with neighbours. There is no freeholder or landlord and no lease, so no time limit on ownership.
Commonholders are responsible for the upkeep of the ‘common parts’ of the building and take joint decisions over maintenance and general improvement works.
Commonhold is well-established in the ownership of US condominiums and strata titles in Australia.
What does Commonhold and Leasehold Reform mean for residential buyers?
It should make it easier for residential buyers to purchase leasehold flats as variables such as ground rent will be set in stone.
However, major changes, such as capping ground rent are not expected to happen until at least 2028. The Bill is under consultation and will then have to pass through the House of Commons and the House of Lords before becoming law.
However, capping ground rents at £250 will be a cost benefit for residential buyers. And reform will make leasehold flats a more attractive prospect for mortgage lenders, who often impose lending conditions, particularly on flats with short leases (typically less than 80 years).
“Many long leases contain opaque or aggressively escalating rent review clauses, which can be difficult for buyers, lenders and practitioners to interpret and often trigger additional enquiries or lender conditions. A clear cap would simplify due diligence and make it easier to advise on future liabilities.”
What does Commonhold and Leasehold Reform Mean for Existing Homeowners?
Commonhold and Leasehold Reform will only affect you if you’re a leaseholder. You could apply to switch from leasehold to commonhold so you own your flat, or house outright. So can your neighbours.
One major caveat of commonhold is that homeowners would be required to organise maintenance, care and repair of the building themselves. This may involve engaging a managing agent. You will likely be required to establish a residents’ group to deal directly with the managing agent.
Should you decide to stay under leasehold ownership, under the changes in the Commonhold and Leasehold Reform Bill you will benefit from greater protections against your freeholder charging excessive ground rent or forfeituring the lease for any infringements.
What does Commonhold and Leasehold Reform Mean for Landlords?
This depends on whether a landlord is also the freeholder of the building. Under Commonhold and Leasehold Reform abuy-to-let landlord who owns a flat and rents it out but is not the freeholder, could technically apply for a lease extension. A longer lease would likely increase the market value of the property should the landlord wish to sell or remortgage.
A landlord would also be eligible for the reduction and eventual elimination of ground rent and could participate in conversion to commonhold ownership along with other residents.
But as the government is aiming leasehold reform squarely at homeowners, how far the proposed freedoms will extend to landlords will become a big matter of debate.
They would lose control of the building, unless they also owned a flat, in which case, they could conceivably join the commonhold. The Residential Freehold Association (RFA) predicts a “forced exit of professional freeholders from the sector”, a sharp decline in the value of landlord portfolios and disruption.
What does Commonhold and Leasehold Reform Mean for Investors?
Bad news, because ground rents will be nowhere near as profitable for all investors, whether they own two or three flats or are involved in large-scale ground rent portfolios.
Institutional investors will take a massive hit, argue real estate specialists at Charles Russell Speechlys law firm, as there has been a big increase in pension funds buying ground rent portfolios over the last fifteen years:
Danny Pinder, director of policy (real estate) at the British Property Federation, agrees, arguing that capping ground rents “will interfere with investments made by pension funds and institutional investors over many years and undermine the government's pursuit of investment in this country… the government’s draft Bill will tear up long-established contracts and property rights, which are pillars of the UK’s investment reputation.”
What Happens Next?
The Draft Commonhold and Leasehold Reform Bill is under public consultation until April 24, 2026.
The government is seeking views from consumers and property experts on the following:
- Scope: what should be captured by a ban on new leasehold flats?
- Exemptions: what is the case for exemptions from the ban?
- Method: how should a ban on new leasehold flats operate as part of our approach to moving to the reformed commonhold model?
- Timing: when to commence a ban on leasehold for new flats, and what transitional arrangements might be necessary?
- Costs and benefits: what will the costs and/or savings be to you or your organisation be, in moving to commonhold and complying with the ban?
