Taking a deeper dive into the draft Commonhold and Leasehold Reform Bill: What do landlords and developers need to know?
On 27 January 2026, the Government published a draft Commonhold and Leasehold Reform Bill together with an accompanying consultation: Moving to commonhold: banning leasehold for new flats which is open until April 2026. The Government has confirmed that it is banning the sale of new flats on a leasehold basis (from the date of implementation of the provisions of the Bill) and mandating that developers comply. At the same time, the Government is proposing reforms to the commonhold model, which was introduced in 2004, but take up has been extremely low.
New flats to be sold on commonhold
Developers will be required to sell all new flats on a commonhold basis. This will include not only purpose-built blocks of flats but also a flat over a commercial unit and new flats in a converted house. Despite the Law Commission suggesting that the Government could incentivise developers to sell on a commonhold basis, 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 to allow them to continue developing the land after some but not all units in the development have been sold. Their 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 Bill enables developers to create commonhold sections with slightly different governing structures for residential areas and commercial units.
The 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 Bill will introduce enhanced powers to appoint and remove directors where they are not complying with their obligations via the Tribunal. The Bill also provides a framework for setting commonhold budgets, approving expenditure and challenging unreasonable expenditure. There will be an ability to accrue reserve funds and to borrow for emergencies. Where there are breaches of the CCS including arrears, there will be a statutory power for the commonhold association to apply for an order for sale as a last resort.
Existing leasehold flats and cap on ground rents
There will be no automatic changes to existing leasehold flats which can continue to be bought and sold on a leasehold basis. 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 both for leaseholders of flats and for freeholders on private estates. There are also proposals in the draft Bill 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. Therefore, it is likely to remain necessary for the leaseholders to collectively purchase the freehold of the building under the relevant statutory provisions before they can then convert to commonhold. The lowering of the participating threshold also means that in the future there are likely to be buildings which have converted to commonhold but still contain some leasehold flats, leading to complex management issues. Whilst the Law Commission acknowledged this potential outcome it is not clear how this hybrid model would operate in practice.
The Bill 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 order as they think fit but they can’t terminate the lease except in very limited circumstances in relation to sub-leases.. 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. In addition, ground rent arrears will be excluded from the enforcement process and non-payment breaches will need to exceed a threshold, to be determined, but likely to sit between £500 and £5,000.
The most headline grabbing of the Government’s plans is the imposition of a 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 and a challenge on human rights grounds by key stakeholders may be in the pipeline if this 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 the expenses incurred by landlords (whether third party or resident owned) for providing services such as cleaning, repairs, insurance which the leaseholders reimburse the landlord for.
Consultation
The consultation looks at what exemptions there should be from the ban on the sale of new flats on a commonhold basis. In addition, it considers timing and what transitional arrangements will be necessary. The Government is also interested in hearing from stakeholders about what additional costs or savings will be made by selling new flats on commonhold.
The publication of the Bill marks another huge step along the path to seismic change to the home ownership model in England. Landlords, developers, investors, leaseholders, tenants and stakeholders in the residential sector should respond to the consultation as the legislation is extremely complex and there will undoubtedly be practical and other issues arising from the Government’s proposals. There is a lot of narrative around reforming commonhold and leasehold and it will be important to ensure that all stakeholders in the sector 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, if either.
We are continuing to track developments on our Essential Residential hub and timeline of the changing landscapes in residential leasehold. Please contact Lauren Fraser, Laura Bushaway or your usual Charles Russell Speechlys contact if you have any queries.
