Government Sets Out Major Reforms To Leasehold And Commonhold: Key Changes Explained

On 27 January 2026, the Government published the Draft Commonhold and Leasehold Reform Bill alongside supporting papers, setting out a package to modernise property ownership, reinvigorate commonhold and curtail controversial leasehold practices in England and Wales. The publication confirms a consultation on banning new leasehold flats and provides further detail on protections for existing leaseholders. Stakeholders across residential, commercial and mixed-use sectors should assess implications for ownership structures, funding models, pipeline schemes and transaction risk allocation.

Key announcements at a glance

The draft Bill, published for pre‑legislative scrutiny before being formally introduced into Parliament as a Bill, would:

1. ban leasehold for most new flats once a viable commonhold alternative is in place;
2. reform commonhold to make it easier to use on both new and existing developments;
3. cap ground rents for existing leases at £250 per year, falling to a token amount after 40 years; and
4. abolish forfeiture, replacing it with an alternative enforcement regime and repeal rentcharge powers on freehold estates.

The proposals on ground rents are scaled back from the Government's earlier plan to abolish them entirely and may face legal challenges from freeholders.

The Government has also launched a consultation, "Moving to Commonhold," asking for views on how a ban on new leasehold flats should be introduced, including any necessary exemptions and transition periods to avoid disrupting housing delivery.

These proposals sit alongside previously announced reforms including regulating managing agents and increasing transparency around building insurance and service charges.

Commonhold reform – the key reforms

The commonhold reforms largely follow the Law Commission's 2020 recommendations and the 2025 White Paper. They include:

1. Introducing "sections" so mixed-use schemes can operate smoothly
2. Setting up separate cost pools, so only those who benefit from particular services pay for them, and vote on them
3. Making reserve funds mandatory
4. Requiring 75% support for changes to "local rules"
5. Introducing faster debt-recovery procedures, overseen by the courts

The aim is to create a model that works for everything from small residential blocks to large, complex estates.

The Government also confirms that certain long leases, such as shared ownership, home purchase plans and some equity release arrangements, will still be allowed within commonholds, with appropriate voting safeguards.

On conversion from leasehold to commonhold, the Government is developing a route based on existing enfranchisement thresholds. It also proposes "mandatory leaseback" arrangements to allow conversions to proceed even where some leaseholders do not agree.

Who would be affected by the reforms?

• Residential homeowners, housebuilders, Build to Rent and single family rental operators - moving to commonhold will change how service charges are managed, remove ground rents and replace forfeiture. It will place more responsibility on owners for budgeting and compliance.
• Commercial landlords and mixed‑use investors – the new "sections" and cost allocation rules aim to protect commercial interests and prevent cross-subsidy. However, schemes will require careful structuring and lenders will expect greater diligence.
• Living sector (including student accommodation, later living): retirement‑specific event fees may continue. Shared ownership interaction is addressed. Management, reserve funding and compliance duties will tighten.
• Lenders and funders: the reforms aim to improve credit risk although stronger financial management and clearer governance. Faster sale processes for arrears will include protections for lenders. Early engagement with policy development remains important.

Key legal and practical implications

• Development and pipeline planning: developers should model the impact of a future ban on leasehold flats and prepare to design schemes for commonhold, particularly around phased development rights, sections and reserve funding.
• Due diligence and transactions: expect more scrutiny of the Commonhold Community Statement, cost allocations, reserve policies, dispute processes and debt recovery mechanisms. Sale packs will rely on improved Commonhold Unit Information Certificates, with capped fees and set timelines.
• Asset management: with forfeiture abolished, new enforcement pathways will apply. Budgets, voting procedures and minority protections will need to be strengthened, with increased Tribunal oversight.
• Mixed-use governance: cost and decision-making segregation should reduce friction between commercial and residential parts of mixed-use schemes, but will need precise mapping of services, access and responsibility. A statutory Code of Practice is expected.

What you need to do now

It is worth remembering that implementation is likely to be some way off, and the draft Bill will no doubt undergo significant amendment before it is even introduced as a Bill, so the key for now is to watch developments closely, engage with the process and see how the final shape of the reforms emerges.

In the meantime, next steps could include:

• Assessing exposure: review your portfolio and pipeline to identify which schemes could be affected by a ban on new leasehold flats.
• Preparing for consultation: gather evidence on where exemptions are needed – such as specialist accommodation – and the likely impact on construction finance and delivery timelines.
• Reviewing existing management practices: for existing assets, continue to track changes under the Leasehold and Freehold Reform Act 2024, including removal of the two year rule (the historic qualifying period in leasehold enfranchisement law) and extensions to the right to manage. Anticipate further regulation of managing agents.

Have your say

The Government is now consulting on the proposal to ban leasehold for new flats as part of the wider move to commonhold. Stakeholders across residential, commercial and mixed-use sectors should engage early and provide data-driven feedback on feasibility, exemptions, timing and financial impact. This input will help shape the final framework and timetable.

You can respond to the consultation on the Ministry of Housing, Communities & Local Government's website.

In summary

These proposals signal one of the most significant overhauls of property ownership in decades. They will influence how schemes are designed, financed and managed, and will reshape governance.

Read the original article on GowlingWLG.com

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