Commonhold and Leasehold Reform Bill: a new chapter for home ownership in England and Wales

The draft Commonhold and Leasehold Reform Bill, published on 27 January 2026, adds to the recent overhaul of residential property law and was earmarked as one of the significant legal developments set to impact the real estate market in 2026. It follows in the footsteps of the Building Safety Act (2022), the Leasehold Reform (Ground Rent) Act (2022) and the Renters' Rights Act (2025).

The bill will undergo pre-legislative scrutiny by the Housing, Communities and Local Government Select Committee, alongside a consultation, supporting policy paper and guidance, before being introduced to Parliament. If implemented, it will repeal and replace Part 1 of the Commonhold and Leasehold Reform Act 2022.

Fundamentally the bill seeks to implement commonhold as the default tenure in England and Wales. If adopted, it would replace the existing long-leasehold system, described by Steve Reed, secretary of state for housing, as being "feudal" in nature and as having "tainted the dream of home ownership for many". With around five million existing leasehold properties in England and Wales, the bill will have significant and far-reaching effects.

Complex transition to new regime

The government appears to recognise the complexities of transition to a new regime. The bill is detailed and will undergo lengthy scrutiny and seeks industry input in the months ahead.

Five of the key changes proposed include:

• commonhold as the default tenure;
• a ban on new long leasehold flats;
• a cap on ground rent;
• tighter controls when enforcing long leases; and
• restrictions on estate rent charges.

Commonhold model

Commonhold is a form of ownership allowing owners to own the freehold of their flat, house or commercial unit without the time-limit on ownership imposed by leasehold tenure, while collectively sharing ownership and management of the communal areas through membership of a commonhold association.

In place of any leasehold arrangement, the commonhold association (governed by a standard form Commonhold Community Statement and articles of association) provides owners with more control over, and greater influence in, the day-to-day running of their homes.

This model is predominantly based on Law Commission recommendations. It has been presented by the government as a purpose-built and fair framework for shared living and as a way to simplify ownership by removing the complexities that regularly arise within leasehold arrangements. In England and Wales, the legal framework for commonhold ownership was first introduced by the Commonhold and Leasehold Reform Act 2002 but, almost 25 years since royal assent, fewer than 20 commonhold buildings have been established.

Commonhold as the default tenure

The bill now seeks to revitalise the commonhold structure and establish commonhold as the default tenure.

New developments are to be registered by the developer as commonhold and each unit will be individually registered and initially held by the developer, until they are sold. The developer will have no further management involvement once all the units are sold (although the bill does permit the reservation of development rights over commonholds for phased developments).

Each unit holder can be a member of the commonhold association, which will be governed by a commonhold community statement, defining their rights, responsibilities and rules (including measures for handling disputes) and potentially supplemented with local rules agreed by individual commonhold associations. There will also be a new requirement to collectively agree the annual budget, who is entitled to be a member of a commonhold association and the criteria that must be met.

The bill has also rectified numerous shortfalls in the 2002 Act:

• Mixed-use developments will be carved up into "sections" (residential and commercial) to better manage building services.
• Certain "permitted leases", including shared ownership leases, will be exempt from commonhold reform.
• Encouragement of the voluntary conversion of existing leaseholds to commonhold by reducing the leaseholder consent threshold from 100% to 50%, in line with the current lease enfranchisement framework. The government has ruled out mandatory conversion due to complexity, disruption and the financial burden of compensating landlords while acquiring the freehold.

Ban on new long leasehold flats

Part 2 of the proposed bill places a statutory restriction on the grant, assignment and marketing of long leases of new flats. The intention is that all new flats sold for homeownership will have to be sold as commonhold, rather than leasehold, unless an exemption applies (for example, build-to-rent units, social rental housing and student accommodation).

The bill would give local authorities certain powers to enforce the ban, including the power to issue financial penalties for non-compliance ranging from £500 to £30,000 per breach. Existing leasehold flats and the regrant of an existing leasehold flat (such as a lease variation or extension) are currently not intended to be caught by the proposed ban.

Transitional arrangements will be required to ensure that all those affected, including developers, consumers and investors, are ready for the changes and that any disruption to the housing supply is kept to a minimum. The government has, therefore, launched a consultation on the best approach to banning new leasehold flats, including seeking opinions on when the ban should come into effect. This "Moving to Commonhold" consultation is now open and will run for 12 weeks until 24 April 2026.

Capping ground rents

While there is currently little indication of proposed timescales for the implementation of the wider bill, the government has stated that a ground rent cap could come into force by late 2028.

The Leasehold Reform (Ground Rent) Act 2022, which achieved royal assent in February 2022, banned landlords in England and Wales from charging more than a peppercorn ground rent in new leases (subject to limited exceptions). The bill would bring about a similar and much-awaited change for existing leases as ground rents will be capped at £250 per year, changing to a peppercorn after 40 years from commencement of the Act. This will eliminate the two-tier market between old and new leases.

There will be some limited exceptions, such as business leases and community housing leases and the bill does not intend to have retrospective effect. This means landlords will not have to reimburse leaseholders for payments of ground rent made before the cap comes into force.

Abolition of forfeiture

The current leasehold regime enables landlords to terminate leases and repossess homes following what could be a relatively minor breach of lease, thereby exposing leaseholders to the risk of losing their home and any equity. Although the ultimate forfeiture of a lease is subject to statutory limitations prior to the exercise of such rights, forfeiture of residential leases has been a long-criticised remedy, with discourse highlighting the striking power imbalance in the landlord-leaseholder relationship.

The bill aims to abolish forfeiture of long residential leases and to replace it with a new and more proportionate enforcement regime. The replacement regime will permit landlords to address breaches of lease but with critical oversight from the courts, therefore minimising the risk of a leaseholder losing their home.

Rent charges

The existing rent charge regime (sections 121 and 122 of the Law of Property Act 1925) allows a rent charge owner to take possession of, or grant a lease over, a property if a debt remains unpaid for 40 days or longer. Critics of the existing regime say that homeowners often do not realise they owe money and risk losing control of their property over what is typically a relatively small debt. These enforcement powers granted to landlords are often considered outdated and disproportionate.

Enhanced protections for this category of homeowners are set out in the proposed bill, with the intended repeal of sections 121 and 122 of the 1925 Act and the introduction of a formal notice of debt being required before any enforcement for debt collection can begin. These proposals form part of the consultation on reforming freehold estate management practices.

Osborne Clarke comment

The bill promises a fundamental overhaul of the residential property market as we know it. Although currently only in its initial draft form, the ultimate aim of the bill is clear. Its stated intention is to provide a fresh focus on outright home ownership and a rebalancing of the landlord/leaseholder relationship in favour of home owners.

While the proposed changes are likely to be welcomed by many, such a significant shift in long-established property rights will no doubt be met with resistance by various stakeholders, in particular by investors and developers.

In particular, the ban on ground rents remains highly contentious. Landlord groups have condemned the measures as unjustified interference with property rights and existing contractual arrangements, warning of adverse effects on investment returns, values and market confidence. However, the £250 cap marks a step back from the previous government's plan to abolish existing ground rents entirely – which prompted significant opposition and was ultimately omitted from the Leasehold and Freehold Reform Act 2024.

Recent experience of leaseholders in enfranchised buildings affected by building safety issues, shines a light on some of the difficulties of funding and managing leaseholder-owned buildings, even where managing agents are appointed. As the bill passes through pre-legislative scrutiny and then onto Parliament, those in the industry should consider the likely impact on their existing portfolios and longer-term pipeline.