Draft Commonhold and Leasehold Reform Bill: key considerations

The UK government recently published a draft Commonhold and Leasehold Reform Bill with an accompanying consultation, Moving to commonhold: banning leasehold for new flats, which is open until 24 April 2026.

The government has confirmed that it intends to ban the sale of new flats on a leasehold basis and mandate that developers comply. It has yet to determine the timing of the ban as the relevant provisions of the bill will need to be brought into force.

At the same time, the government is proposing reforms to the commonhold model, which has seen low uptake since it was introduced in England and Wales under the Commonhold and Leasehold Reform Act 2002.

Despite the Law Commission suggesting that the government could incentivise developers to sell on a commonhold basis, instead the government will be mandating them to do so.

Reforms to the commonhold process will be critical – for example, developers will have statutory development rights that allow them to continue developing the land after some but not all units in the development have been sold.

Developers' ability to appoint or remove directors of the commonhold association will depend on their vote share calculated by how many units they own in the building, which will decrease as the development completes and units are sold.

The draft bill also enables developers to create commonhold sections with slightly different governing structures for residential areas and commercial units.

Unit holders will all be members of the commonhold association, and the Commonhold Community Statement (CCS) will govern the rights and responsibilities of the unit holders and commonhold association.

The draft bill gives unit holders enhanced powers to appoint and remove directors who fail to comply with their obligations through the First-tier Tribunal, and provides a framework for setting commonhold budgets, approving expenditure and challenging unreasonable expenditure, as well as means to accrue reserve funds and borrow for emergencies.

However, the government plans to implement provisions of the Leasehold and Freehold Reform Act 2024 to reform some aspects of leasehold. For example, to introduce standard form service charge demands and accounts for leaseholders of flats and freeholders on private estates.

The draft bill proposes to make it easier for existing leasehold buildings to convert to commonhold by reducing the proportion of existing leaseholders who must consent from 100% to 50%.

However, the freeholder's consent would also be required, together with that of any lenders holding a charge over the freehold or any lease, as it is in the current process.

Therefore, it is likely that leaseholders will still need to collectively purchase the freehold of the building under the relevant statutory provisions before they can convert to commonhold.

Lowering the participating threshold also means that, in future, there are likely to be buildings that have converted to commonhold but still contain some leasehold flats, leading to complex management issues.

While the Law Commission acknowledged this potential outcome, it is not clear how this hybrid model would operate in practice.

The draft bill also seeks to abolish forfeiture as a remedy available to the landlord for breach of covenant. The proposed replacement is a process of enforcement notices where the courts are given wide powers to make such orders as they think fit, but they can't terminate the lease except in very limited circumstances in relation to subleases.

The outcome of the enforcement process is likely to be an order for sale of the tenant's lease or an order to compel the tenant to remedy the breach complained of. This is different to forfeiture where the lease is terminated and the property reverts to the landlord.

Under an order for sale, the property can be sold and any arrears discharged. Any balance from the proceeds of sale goes back to the leaseholder.

In addition, ground rent arrears will be excluded from the enforcement process and non-payment breaches will need to exceed a threshold, which remains to be determined but will likely sit between £500 and £5,000.

Arguably the most headline-grabbing reform is the proposed cap on ground rents in existing leases at £250 per year per property, which will automatically convert to a peppercorn (nil) after 40 years.

This is a significant interference with an existing contract by the government, which could lead to challenges on human rights grounds by key stakeholders if it becomes law.

Ground rents are usually retained by the landlord (whether a third party or resident-owned company) but in some blocks a landlord may use them to top up service charges if the leases don't enable 100% service charge recovery.

Service charges are expenses incurred by landlords (whether third party or resident owned) for providing services such as cleaning, repairs and insurance, for which the leaseholders are required under the terms of their lease to reimburse the landlord.

Landlords, developers, investors, leaseholders, tenants and stakeholders in the residential sector should respond to the accompanying consultation, given the complexity of the legislation and the likelihood of practical and wider issues arising from the proposed reforms.

For example, the consultation considers what exemptions there should be from the ban on the sale of new flats on a commonhold basis, as well as implementation timelines and necessary transitional arrangements.

The government is also interested to hear from stakeholders about what additional costs or savings will be made by selling new flats on commonhold.

All stakeholders in the sector should understand what the changes will mean for them. For example, whether a building has a leasehold structure or commonhold model, the owners of the flats/units within the building will be responsible for the costs incurred in running that building; only time will tell which model is ultimately cheaper.

A version of this article was previously published by Charles Russell Speechlys in January 2026. The article reflects the law and market position at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought in relation to any specific matter.