Commonhold and Leasehold Reform Bill 2026: a transformational shift in property ownership
Last month, the UK Government published the Draft Commonhold and Leasehold Reform Bill, signalling one of the most significant overhauls of residential property law. This draft bill is designed to modernise and rebalance the relationship between landlords and leaseholders, with a move towards a more equitable commonhold framework.
Alongside the draft Bill, the Government issued a press release outlining headline reforms—including a radical new ground rent cap and a ban on most new leasehold flats—and launched a 12‑week consultation, Moving to Commonhold, running until April 2026. The key highlights are as follows:
1. Ground Rent Reform: A cap and a long-term phase-out
One of the most impactful elements of the draft Bill is the proposal to cap ground rents on existing long residential leases at £250 per year, with a transition to a peppercorn rent after 40 years. This change overrides existing lease terms and will significantly reduce the value of some freehold reversion portfolios—an area of concern for investors such as pension funds that have increasingly acquired ground rent assets over the last decade.
Government policy papers confirm the new cap and long-term phase-out, describing them as central to reinvigorating the framework for existing leaseholders.
2. Ending Leasehold for most new flats
The Bill proposes that new flats will no longer be sold as leasehold, instead requiring developers to adopt commonhold as the tenure of choice for multi-unit residential buildings. This ban will take effect once a viable commonhold model is embedded in the market and follows sustained criticism of leasehold practices and ground rent structures.
This shift represents a major cultural change in property development: individual flat owners will own their units outright, and collectively own and manage the building via a Commonhold Association.
3. Making Commonhold easier to adopt
To support the transition, the draft Bill introduces several measures intended to make commonhold more workable and attractive for both new and existing developments. These include:
- Reducing the threshold for conversion from unanimous consent to 50% leaseholder approval, addressing one of the main obstacles to commonhold adoption.
- Introducing mixed‑use “sections” within commonholds, enabling residential and commercial parts of buildings to operate independently where appropriate.
- Mandatory reserve funds, ensuring long-term financial planning.
- Separate cost pools, so owners only pay for services they actually benefit from; and
- 75% voting requirement for changes to local rules, providing clarity and governance structure.
These reforms reflect the Law Commission’s 2020 recommendations and subsequent White Papers, aiming to create a commonhold model suitable for everything from small blocks to large, complex estates.
4. Abolishing forfeiture and overhaul or enforcement
The draft Bill plans to abolish forfeiture, a remedy long criticised as disproportionate given its capacity to deprive homeowners of their property over relatively small debts. In its place, a new, fairer enforcement regime will balance the need to protect leaseholders’ homes and still provide landlords with routes to enforce breaches.
Government documents confirm that similar harsh enforcement powers relating to estate rent charges on freehold estates will also be repealed.
This marks a major shift in the law and responds to longstanding calls across the sector for reform.
5. Implications for Landlords, Developers and Investors
For landlords and developers, the Bill represents a “seismic change” in the residential sector. Ground rent caps and the abolition of new leasehold flats will reduce existing revenue streams and require adjustments to future funding models. Critics warn of potential legal challenges, particularly around valuation methodologies and the possible human rights impacts of interfering with contractual rights.
Nonetheless, the Government estimates substantial lifetime cost savings for leaseholders and asserts that the reforms are essential to restore fairness and modernise property ownership structures.
6. A pre-legislative window for stakeholder input
The Bill is currently published for pre‑legislative scrutiny, offering property owners, developers, lenders, agents and professional bodies a crucial opportunity to shape the final legislation before formal introduction to Parliament.
The associated consultation—open until 24 April 2026—seeks views on topics such as exemptions from the ban on new leasehold flats and transitional arrangements to avoid harming housing delivery.
Given the significance of the proposals, sector-wide engagement is expected to be high.
Greater security and control for homeowners
The Draft Commonhold and Leasehold Reform Bill 2026 marks a historic pivot away from traditional leasehold structures and towards a future where the Government intends for homeowners to enjoy greater security, transparency and control. While the reforms will present challenges—particularly for landlords and investors—the direction of travel is clear: leasehold is no longer the default model, and commonhold is set to take its place.
As the Bill progresses through consultation and scrutiny, stakeholders across the residential property landscape have a vital role in shaping a future system capable of meeting the needs of modern homeowners and communities.
How Hamlins can help
The Hamlins Real Estate Disputes team has expertise in commercial and residential matters and advises landlords and tenants. We seek to obtain the best outcome possible for every client, no matter how big or small the issue may be. If you would like a conversation to find out how we can help you, please get in touch.