Lawbite: Commonhold Reimagined: The Bill Set to Break the Leasehold Cycle

The draft Commonhold and Leasehold Reform Bill (2026) (“the Bill”), sets out a major package of reforms intended to modernise, strengthen, and ultimately replace large parts of the leasehold system in England and Wales. It is one of the most significant property‑law reforms in decades.

Published on 27 January 2026, the Bill is focussed on addressing issues associated with leasehold tenure and promoting the adoption of commonhold as an alternative. The draft Bill seeks to address the limited adoption of commonhold since its introduction in 2004 by simplifying the process for converting existing leasehold developments to commonhold.

The intention is that all new flats will be sold as commonhold, replacing leasehold as the default tenure of property ownership in England and Wales. Its core purpose is therefore to shift the housing market away from leasehold and make commonhold a practical, mainstream form of ownership.

The development will be of interest to owners, occupiers and investors of residential properties in England and Wales, together with those involved in the management of such properties.

Headline Reforms – An Overview

Commonhold

The Bill proposes to replace long-leasehold ownership (i.e. a time limited right and not outright ownership) with a strengthened commonhold framework, a form of freehold ownership (i.e. a perpetual proprietary interest).

The commonhold model, first introduced by the Commonhold and Leasehold Reform Act 2002, provides collective control and ownership of common areas through participation in a commonhold association. This ensures residents have direct oversight over building management, costs and decision-making, replacing the traditional role of a landlord in leasehold structures.

Measures in the Bill will prohibit the sale of new leasehold flats, which will mean that most new flats provided for homeownership will instead need to be sold as commonhold.

In a bid to make commonhold work for all types of developments, the Bill looks to introduce the ability to set up “sections” to separate out the management of different types of interest within the commonhold, such as mixed-use sites containing residential and commercial interests. The thinking being that only owners within a particular section are able to vote on matters affecting that section, and that only those who benefit from a particular service are responsible for paying towards it.

Leasehold Reforms

The Bill introduces a range of measures to address issues with leasehold tenure. These include banning the grant or assignment of certain long residential leases of houses, capping ground rents at £250 per year (changing to a peppercorn after 40 years), and abolishing forfeiture in favour of a fairer lease enforcement scheme.

The abolition of forfeiture and introduction of a fairer lease enforcement scheme aims to balance the rights and obligations of leaseholders and landlords, addressing longstanding concerns about the inequities of the current system.

Estate Rent Charges

The Bill also proposes significant changes to estate rent charges on freehold estates. Specifically, the Bill aims to repeal enforcement powers that currently apply to estate rent charges. This reform is part of a broader initiative to create a "new, fairer and more proportionate lease enforcement scheme" that benefits both leaseholders and landlords. The repeal of these enforcement powers is intended to address concerns about the disproportionate remedies available to estate rent charge owners when homeowners fall into arrears.

Takeaways

Anyone involved in development, investment, asset management, lending, conveyancing, or estate management will need to consider the implications of the Bill. Some key points for consideration include:

• The proposed ban on leasehold for most new flats, transitioning the market to commonhold once the system is ready will cause a structural market change affecting development models, pre‑sales, tenure strategy, and valuation.
• Whilst the focus of the Bill is on new flats, it does also look to make it easier for existing leasehold buildings to convert to commonhold by making conversion possible when 50% of qualifying leaseholders agree – currently 100% need to agree.
• Valuations for portfolios with significant ground rent elements will be materially impacted. Freeholders, ground‑rent investors, and funds will need to re‑model expected income streams. It is also possible that such an interference with existing contractual/proprietary rights could lead to challenges based on human rights grounds
• The abolition of forfeiture means Landlords lose a powerful enforcement tool, altering risk profiles in leasehold investment. Lenders will also need to assess whether the new enforcement regime provides sufficient security. It should be noted that the abolition of forfeiture does not apply to commercial tenancies, although the guidance accompanying the Bill states that the government and the Law Commission are “continuing to explore options for reform in those sectors”
• Commonhold shifts responsibilities away from an external landlord and places them on unit owners collectively, through the commonhold association. There will be operational and governance responsibilities for owners and a need for owner education to understand those long term responsibilities.

The Bill remains in draft form and is undergoing pre‑legislative scrutiny. The government has also launched a consultation to seek views on its proposal to ban the use of leasehold for most new flats to make commonhold the default. The consultation seeks views on the scope and timing of the proposed ban and any exemptions, and closes on 24 April 2026.

Implementation will be phased, with some measures forecast to come into force from 2028, subject to parliamentary approval.