Briefing Note: Commonhold and Leasehold Reform Bill 2026

The Bill aims to:

• end the existing little used commonhold regime,
• end the grant of new residential leaseholds,
• cap all existing residential leasehold ground rents,
• end the existing forfeiture and relief regime for residential leases, and
• regulate estate rentcharges.

In this briefing note we look at how the changes proposed might affect the residential leasehold landscape for stakeholders.

The Bill will replace Part 1 of the Commonhold and Leasehold Reform Act 2002 which first introduced commonhold as a form of tenure in England and Wales. Commonhold gives buyers perpetual ownership of their individual flat and a stake in the control of shared areas of the building in which it is located. Once the Bill is in force the grant of new long leases (with a term over 21 years) will be prohibited and commonhold will be the only form of tenure that can be granted (with a few notable exceptions set out below).

Commonhold benefits “unit” owners by eliminating ground rent payments, ending the gradual diminution in the value of premises arising with leasehold tenure, and giving flat owners a direct stake in the management of their building.
The Bill’s headline changes include:

• leasehold buildings currently require unanimous consent for conversion to commonhold. This threshold will be changed enabling conversion with the consent of just 50% of qualifying leaseholders, with a mechanism to phase out residual leaseholds (via mandatory leaseback) to enable full conversion;
• the introduction of “sections” to allow different parts of the commonhold (commercial sections and residential sections of mixed-use developments) to be given different voting rights or service cost obligations that are appropriate to that specific section;
• improvements to governance of commonhold buildings, by giving the First-tier Tribunal power to appoint directors to managerial roles within the commonhold (where take-up is poor amongst unitholders and to facilitate remove of those who fail to perform directors obligations);
• introduction of a Commonhold Community Statement to formalise governance within commonhold buildings, with provisions prescribed by legislation taking automatic effect supplemented by building specific provisions;
• mandatory reserve funds for each commonhold to ensure funds are available for major works or repairs;
• reduction in developer voting rights to reflect diminution in units owned as phases complete but also reserving rights for developers where a site is not complete (FTT also given power to review proposals);
• a debt recovery mechanism that allows a commonhold association to apply for an order for sale against unitholders who fails to meet contribution obligations.

The legislation will prohibit the grant or assignment of new long residential leases of flats, however some leases will be exempt. Exempt leases currently comprise shared ownership leases (staircasing) and home finance plan leases, however there may be additional exemptions and we will not know all exempt lease categories until the public consultation phase of the Bill has concluded.

Yes, the Bill provides for a lower consent threshold for leaseholders that want to convert to commonhold, reducing from 100% to 50% of qualifying leaseholders, aligning with enfranchisement rules.

Non-consenting leaseholders’ interest in their flats will remain as leaseholder but they will join the Commonhold Association and have voting rights. Their leases will align with the CCS, and over time any residual leasehold interests will be phased out as on sale (or lease extension) they must convert to commonhold.

The Bill introduces a £250 p.a. cap on ground rents for all existing long leases for a transitional period of 40 years. From then onwards ground rents drop to a peppercorn (effectively nil). This extends the ground rent escalation protections under the Leasehold Reform (Ground Rent) Act 2022 (LRGRA), which only applied to new leases, to all pre-LRGRA leases.

The remedy of forfeiture for breaches of covenants will be replaced with a new statutory enforcement scheme with greater judicial oversight, expected to include powers for the Court to make remedial orders or, in more serious cases, orders for sale and costs orders.

If an order for sale is made the landlord recovers sums claimed from the sale proceeds. The leaseholder receives any balance once landlord’s costs and monies owed to any mortgagee have been paid.
This is a significant change and represents a more structured and balanced approach to lease enforcement than the current system of forfeiture and relief.

The Bill proposes the removal of draconian remedies for rentcharge arrears, such as taking possession or granting a lease of the affected property. Rentcharge owners will need to serve a demand notice on the encumbered land owner, with details of the claimed arrears and giving 30 days to pay before enforcement action can proceed. Rentcharge owners will still be able to recover arrears through less draconian means, such as the small claims court.

With this Bill the Government is moving away from the long leasehold model for flats in England and Wales. Whilst still in draft form and subject to further consultation and passage through Parliament, the draft Bill gives investors, developers, freeholders, leaseholders and lenders alike a clear indication of the future and all stakeholders should be considering the implications for existing portfolios and future transactions now to understand what these changes mean for their business.

We will issue updates on the Bill if changes are made during the consultation phase or following Parliamentary scrutiny.

This article was written by Jane Hamilton, Real Estate PSL.