The Commonhold And Leasehold Reform Bill – Where Are We Now

The Renters’ Rights Act 2025 brought an end to the so‑called “AST trap” for leaseholders on 27 December 2025, two months after Royal Assent. The AST trap allowed some freeholders to evict leaseholders for non‑payment of ground rent by relying on the possession regime in section 8 of the Housing Act 1988.

In certain circumstances, long‑term residential leases were treated as assured shorthold tenancies. This enabled landlords to seek a mandatory possession order under Ground 8 of Schedule 2 to the Housing Act 1988 where at least three months’ rent was unpaid and more than three months in arrears, in cases where rent was payable annually.

Why did this happen?

The Housing Act 1988 did not originally exclude long leases from its scope. As a result, any lease granted after 1996 could fall within the assured tenancy regime if:

• Ground rent exceeded £250 per year (or £1,000 in Greater London);
• The leaseholder was an individual (not a company); and
• The property was the only or principal home of at least one leaseholder.

This created significant risk for lenders: if a freeholder obtained possession for ground rent arrears, the lender’s security could be lost, and under AST rules, the freeholder did not need to notify the lender when seeking possession.

What changed?

Section 31 of the Renters’ Rights Act 2025 came into force on 27 December 2025. It amended the Housing Act 1988 to exclude long leases from the assured tenancy regime, ending the AST trap. Freeholders can no longer rely on Ground 8 for possession in these cases.

Going Forward

Whilst this is good news for leaseholders many Lenders have yet to update their UK Finance Handbook sections to remove their requirements for an indemnity. So many conveyancers are still having to review lender requirements and manage their clients expectations “where the law has changed but the lender’s criteria hasn’t”.