Property industry offers cautious welcome to long-awaited reforms, while warning delivery, timing and detail will be critical.
28th Jan 20261 2,429 5 minutes read Simon Cairnes
The Government has published the Draft Commonhold and Leasehold Reform Bill, setting out its proposed changes for residential tenure in England and Wales.
The draft Bill proposes banning the use of leaseholds for most new flats, making it easier for existing leaseholders to convert to commonhold, capping ground rents on millions of existing leases and abolishing forfeiture for long residential leases.
It has been published along with a consultation document for the implementation of commonhold reform.
Commonhold framework overhauled
The Bill repeals and replaces the existing commonhold framework introduced in 2002. It sets out a revised statutory model so it will work for larger and mixed-use developments, through updated governance arrangements, budgeting provisions and the introduction of “sections” within a single commonhold.
For existing buildings, the Bill lowers the legal threshold for conversion from leasehold to commonhold by removing the requirement for unanimous consent under the current system. Further details will be set out in secondary legislation.
Restrictions on new leasehold flats
The draft Bill proposes a ban on the grant or assignment of most new long residential leases of flats, subject to limited categories of permitted leases, including certain shared-ownership arrangements.
Trading Standards will be responsible for enforcement, including financial penalties and statutory redress for affected buyers, with the details to be set out in secondary legislation.
Ground rent cap extended
The Bill extends ground rent regulation to long residential leases not covered by the Leasehold Reform (Ground Rent) Act 2022.
Under the new proposals, ground rents would be capped at £250 per year, before reducing to a peppercorn after 40 years. A policy statement published alongside the draft Bill sets out the Government’s rationale for the structure and transitional period.
Forfeiture abolished
The draft legislation abolishes forfeiture for long residential leases and replaces it with a new court-based lease enforcement framework. It also repeals the enforcement powers for estate rentcharges on freehold estates — charges paid by freeholders for shared estate maintenance, which allow a third party to take control of a home if payments are missed.
Legislative status
The Bill will be subject to consultation, scrutiny and amendment before it is introduced to Parliament. Key elements of the proposals – including timing, exemptions and implementation – rely on secondary legislation that has not yet been published. No start dates or deadlines have been specified in the draft Bill.
Industry response
Mark Chick, Director of the Association of Leasehold Enfranchisement Practitioners
Mark Chick, Director of the Association of Leasehold Enfranchisement Practitioners and senior partner at Bishop & Sewell LLP, said:
“This draft legislation is long-awaited, both by the industry and by the 5 million-plus leaseholders in England and Wales.
“ALEP has consistently supported the Government’s intention to reform leasehold, but reform must be workable, evidence-based and developed in partnership with the professionals who will be responsible for implementing it.
“There is clear pressure to accelerate change, but reforms of this magnitude must balance speed with care.”
These changes will affect the value of freeholders’ assets, yet today’s announcements are silent on compensation.”
Danny Pinder, Policy Director, British Property Federation
Danny Pinder, Director of Policy at the British Property Federation, said:
“While we agree that rapidly escalating ground rents should be addressed, the proposed cap will interfere with investments made by pension funds and institutional investors over many years.
“The documents published today make clear that these changes will affect the value of freeholders’ assets, yet today’s announcements are silent on compensation.
“There are billions of pounds invested in large-scale residential and mixed-use developments, and reform must be mindful of the rights of property owners as well as leaseholders.”
Biggest barriers
Timothy Douglas, Head of Policy and Campaigns, Propertymark
Timothy Douglas, Head of Policy and Campaigns at Propertymark, said:
“We welcome the announcement to cap ground rents and ultimately reduce them to a peppercorn rate.
“Our research with member agents shows that leasehold properties with escalating ground rent will struggle to sell, even if priced correctly.
“Addressing ground rents for existing leaseholders tackles one of the biggest barriers to selling leasehold property.”
May not be the silver bullet some leaseholders are hoping for.”
Caroline Wild, Counsel in Real Estate Disputes, Forsters LLP
Caroline Wild, Counsel in Real Estate Disputes at Forsters LLP, said:
“The reinvigoration of a more flexible tenure, such as commonhold, is welcome, but it may not be the silver bullet some leaseholders are hoping for.
“Introducing commonhold in phases, starting with new developments, is likely to be the most workable option, particularly for complex mixed-use schemes.”
Greater certainty
Justin Young, Chief Executive, RICS
RICS CEO Justin Young commented: “Today’s announcement offers greater certainty and clarity on the Government’s proposed reforms to the leasehold system, including long-awaited action on ground rents.
“The publication of the draft Commonhold and Leasehold Reform Bill is a critical step in this process. RICS looks forward to working with members, MHCLG, and other key stakeholders to deliver the best outcomes for consumers and the market.”
The UK Government’s newly announced cap on ground rents will, in practice, materially affect a relatively small minority of leaseholders.”
Gary Scott, Spector Constant & Williams
Gary Scott, Property Litigation Partner at London law firm Spector Constant & Williams, comments: “The UK Government’s newly announced cap on ground rents will, in practice, materially affect a relatively small minority of leaseholders — likely less than 25% of all those with a ground rent obligation.
“Current government estimates indicate that around 770,000 to 900,000 leaseholders pay more than £250 per year, out of approximately 3.8 million leasehold properties that still carry a ground rent charge.
“For those leaseholders still burdened by onerous, doubling, or investment-linked ground rents, the cap represents a targeted but meaningful intervention, providing relief to those who have been disproportionately affected by historic leasehold practices.
Change welcomedHomeOwners Alliance said:
“We welcome the commitment to cap ground rents and ultimately reduce them to a peppercorn, ending the practice of homeowners paying ongoing charges for the land beneath their own homes.
There are significant hurdles ahead before these changes take effect.”
“However, leaseholders should be clear this is still a proposal, not the law. There are significant hurdles ahead before these changes take effect, and after years of delay, vested interests should not be allowed to slow reform any further.”
Gavin Walmsley, Irwin Mitchell
Gavin Walmsley, leasehold specialist at Irwin Mitchell, said:
“This represents one of the most significant shifts in the leasehold system in decades, but it also opens the door to legal challenge. Large freeholders and pension funds are highly likely to test the proposals in court, particularly around compensation.
complex issues“While the Government has signalled its intention to revive commonhold, these reforms raise complex issues for lenders and investors that have yet to be resolved. With the Bill now moving into pre-legislative scrutiny, further consultation and challenge look inevitable before any changes take effect.”
Major legal implications
Jason Tann, Partner, Howard Kennedy
Jason Tann, Partner at legal firm Howard Kennedy, said the plans would rewrite existing lease contracts, transferring value away from freeholders, many of them pension funds, and potentially opening the door to legal challenge.
“Legislating to change private agreements that have already been entered into, and which form the basis of billions of pounds of institutional investment, will be of significant concern to international investors just as confidence is starting to increase in the UK again.”
TagsDraft Commonhold and Leasehold Reform Bill Ground rent cap 28th Jan 20261 2,429 5 minutes read Simon Cairnes Share Facebook X LinkedIn Share via Email
