A practical guide to the Draft Commonhold and Leasehold Reform Bill
By Coral Harvey
Housing Policy for England and Wales is changing.
Last week the government has published the Draft Commonhold and Leasehold Reform Bill, one of the most significant property law proposals in recent years. The Bill strengthens and expands the commonhold framework, making it the default tenure for most new flats and simplifying conversion for existing leaseholders. It caps and phases out ground rents, abolishes forfeiture, reforms estate rentcharge enforcement, and introduces stronger leaseholder rights, transparency, and a simpler legal structure.
The draft Bill sits alongside an open consultation, closing 24th April 2026. Below, we break down the biggest changes.
Moving to a Commonhold Model
The Bill proposes commonhold will becomes the default tenure for new flats. Commonhold offers a freehold form of flat ownership where owners share control through a commonhold association, managing the building and shared facilities collectively.
Commonhold was first introduced under the Commonhold and Leasehold Reform Act 2002 as an alternative to leasehold. Since the legislation came in fewer the 20 commonhold developments have been created and leasehold has remained the default tenure.
In 2020, the Law Commission undertook a review of commonhold as part of its 13th Programme of Law Reform, recommending changes to simplify conversion to commonhold, strengthen governance, support development, and address lender concerns. The draft Bill proposes:
New flats will be provided as commonhold (other than in exceptional circumstances)
Flat owners will hold a freehold interest in their property from day one
There is no lease in commonhold ownership
Owners will share control over the management of the common parts through a commonhold association, a company limited by guarantee
The Commonhold Community Statement is the legal document which will set out the rules for management, maintenance, costs and decision-making for owners and the commonhold association
Stricter rules on service charges and management fees
Enhanced rights to challenge excessive costs and poor management
Reserve funds will be a statutory requirement managed by the commonhold association, with an obligation to undertake periodic reserve fund studies
Commonhold is intended to function without a landlord or managing agent, relying on all owners working together. Owners gain a stronger voice but inevitably carry the risks associated with managing complex buildings.
The role of a commonhold director is not dissimilar to a Residents Management Company (RMC) director. In all cases, directors are responsible for governance, compliance and must follow the company’s rules and obligations. This differs from RMC directors, who can only operate within the limits set by the lease terms.
The consultation invites views on introducing mandatory expertise for high-risk buildings in England. Self-management may suit simpler buildings, but complex or higher-risk buildings are highly likely to need the guidance of professional directors or specialist managing agents, particularly where fire safety and regulatory expertise is required.
Currently, conversion from leasehold to commonhold requires unanimous leaseholder consent. In practice, this blocks almost all attempts. The proposals would lower the consent requirement for conversion to 50%, align non-consenting leaseholders’ rights with commonhold unit owners, and introduce a time-limited process for residual leaseholds to phase out gradually through conversion, extension, or resale.
Ground Rent Caps
The Government proposes to build on the Leasehold Reform (Ground Rent) Act 2022 (GRA 2022), which banned landlords in England and Wales from charging more than a peppercorn rent in new leases (subject to exceptions).
The Bill introduces a £250 cap on ground rent for existing long residential leases. The cap is intended to prevent ground rents from affecting affordability, mortgage access, or marketability.
Key points:
Ground rent capped at £250 per year
After 40 years, ground rent reduces to a peppercorn
Similar to the GRA 2022, there will be limited exceptions such as business leases and community housing leases
No refunds for historic overpayments
Forfeiture replaced by fairer lease enforcement scheme
Forfeiture is one of the most criticised features of leasehold law, with landlords being able to rely on forfeiture to terminate a lease if a leaseholder breaches its terms.
The draft Bill abolishes forfeiture for long residential leases, replacing it with a new statutory lease enforcement scheme.
Under the new framework:
Landlords can make a lease enforcement claim to the courts (subject to certain statutory conditions)
The courts decide outcomes based on proportionality and seriousness of the breach
Remedies include compliance orders or, as a last resort, an order for sale of the property
Certain breaches will be excluded from the scheme, including ground rent arrears and other non-payment breaches under a specified threshold .
The scheme will apply to existing long residential leases where the landlord currently has the right to forfeit. Forfeiture will remain for commercial leases
It’s hoped the new enforcement approach will reduce the risk of disproportionate outcomes for leaseholders while still allowing landlords to seek court action where non-compliance puts other residents at risk.
Estate Rentcharges
Estate rentcharges are used on privately managed estates to recover the cost of shared services such as roads, drainage, and open spaces. It’s thought the proposed legislation will reduce the risk of losing rights for home owners and create a simpler process for buyers, sellers and conveyancers.
The Bill proposes:
Repealing sections 121 and 122 of the Law of Property Act 1925, the legal powers which currently give rentcharge owners enforcement rights
Setting a more proportionate process for estate rentcharge arrears to be enforced
Rentcharge owners will be required to give notice before enforcement action begins
What does the bill mean for the leasehold market?
There are an estimated five million existing leasehold properties across England and Wales, and conversion to commonhold will remain voluntary. The Government have been clear existing leaseholders will not be left behind. The Government’s documents present the reforms as improving outcomes for existing leaseholders while establishing a modernised commonhold model for new flats.
However, the introduction of commonhold will inevitably have wide ranging effects the leasehold property market:
Moving to a commonhold model will reshape the leasehold property market by shifting flats toward resident control, and away from external landlords. This change may bring about a two-tier market where existing leasehold flats are considered higher risk and more expensive for leaseholders in the long run. Could this cause leasehold flats to fall in value?
The change will reduce traditional freeholder income streams, such as ground rents and lease extensions, making investment in the sector less attractive.
Managing agent will have more direct accountability to residents and an increased demand for transparent management.
A shift to commonhold will require lenders to adapt through updated frameworks, stronger governance assurance, and clear rules on repairs and reserve funds.
If well-implemented, commonhold could boost confidence in the flats market by removing key leasehold issues for example rising ground rents, and limited management control.
Estate rentcharge reforms could improve buyer and lender confidence by reducing enforcement risks and increasing transparency.
Consultation
This is a draft Bill at an early stage of the legislative process. Industry professionals will have time beyond the consultation period to understand and prepare for the proposed changes.
The Government consultation is open for 12 weeks closing 24th April 2026. SAY will be responding, and we encourage other industry stakeholders to respond too.