Draft Commonhold and Leasehold Reform Bill

The UK government has unveiled sweeping proposals to overhaul the long-standing leasehold system through the draft Commonhold and Leasehold Reform Bill. The legislation introduces a £250 annual cap on ground rents, proposes banning new leasehold flats, and seeks to revive the commonhold model of property ownership. The reforms represent one of the most significant changes to property law in England and Wales in decades and are intended to address longstanding criticism that the leasehold system unfairly disadvantages homeowners.

Key proposals in the draft bill

The draft legislation, published in January 2026, forms part of a broader government programme to reform property ownership. One of the central measures is a cap on ground rents of £250 per year for existing leasehold homes, which would apply for a transitional period of 40 years before falling to a “peppercorn” rate—effectively zero,

Ground rent refers to the payment made by leaseholders to the freeholder for the land on which their property stands. While often modest historically, some modern leases include escalating clauses that have left homeowners paying increasingly high annual charges. The government argues that the cap will significantly reduce costs and could save leaseholders billions over time.

The bill also proposes banning the creation of new leasehold flats and replacing the system with a strengthened commonhold framework. Under commonhold, flat owners would own their property outright while collectively managing shared areas of the building.

Another major change is the removal of the forfeiture rule, which currently allows landlords to reclaim a property if certain debts—sometimes as low as a few hundred pounds—remain unpaid. The new framework would introduce a more proportionate enforcement system.

Together, these proposals signal a structural shift away from leasehold, which critics say is an outdated system rooted in medieval land law.

Why the government believes reform is necessary

The government argues that the existing leasehold structure has created widespread financial and legal problems for homeowners. More than five million people in England and Wales live in leasehold properties, and many face escalating ground rents, high service charges and difficulties selling their homes.

According to Housing Secretary Steve Reed, the reforms are intended to address a system that has undermined the promise of home ownership. He said: “If you own a flat you can be forced to pay ground rents that can become completely unaffordable.”

The government has also highlighted how high or escalating ground rents have affected mortgage lending and property sales. Some lenders are reluctant to finance homes with problematic lease terms, leaving homeowners trapped in unsellable properties. By capping rents at £250, ministers believe the reforms will help stabilise the market and remove barriers to lending.

Another key aim is to empower homeowners by shifting towards commonhold ownership. Unlike leasehold, commonhold gives residents permanent ownership of their homes and a collective say in how the building is managed. Supporters say this model is already widely used in other countries and offers a fairer structure for shared residential buildings.

The push to revive commonhold

Although commonhold was introduced in England and Wales in 2002, it has rarely been adopted by developers. The new bill aims to revitalise the system and make it the default model for new flats.

Under the proposed reforms, existing leaseholders could more easily convert their buildings to commonhold ownership, giving residents control over budgets, maintenance and management decisions.

The government argues that this will remove the landlord-tenant relationship inherent in leasehold and create a structure where homeowners collectively manage their properties.

Reaction from leaseholder campaigners

Many leaseholder groups and housing campaigners have welcomed the reforms as a long-overdue step toward fairness in the housing market.

Campaigners argue that excessive ground rents and complex lease terms have left homeowners financially vulnerable. Some leaseholders currently pay well above £250 annually, particularly where leases contain clauses that double the rent every few years.

However, campaign groups have also raised concerns about the pace of reform. One campaigner warned that the benefits will only materialise if the legislation progresses quickly, stating that “the speed of leasehold reform is glacial.”

Critics within the campaign community also argue that the proposed 40-year transition period before ground rents are reduced to zero could delay meaningful relief for some homeowners.

Opposition from freeholders and investors

While widely welcomed by leaseholder advocates, the proposals have sparked strong opposition from organisations that benefit from ground rent income.

Freeholder groups argue that the cap represents an unfair retrospective change to existing property contracts. The Residential Freehold Association described the measure as a “wholly unjustified interference with existing property rights” that could damage investor confidence.

Investors have also warned of financial consequences. Asset manager M&G, which holds hundreds of millions of pounds in ground rent assets, said the reforms could result in a £230 million one-off hit to its finances.

Some industry commentators also caution that replacing leasehold with commonhold could create management challenges. Justin Herbert of Residential Management Group argued that while residents should have greater control, “full control comes with full responsibility,” particularly regarding building safety compliance.

These concerns reflect the broader tension between consumer protection and property investment interests within the UK housing market.

A fundamental shift in property ownership

The draft Commonhold and Leasehold Reform Bill represents a major attempt to reshape the way flats are owned and managed in England and Wales. By capping ground rents, banning new leasehold flats and promoting commonhold ownership, the government hopes to dismantle what many view as an outdated and unfair property system.

Supporters believe the reforms could transform home ownership by giving residents greater control and reducing hidden costs. Opponents, however, warn of unintended consequences for investors and property management structures.

As the draft legislation undergoes parliamentary scrutiny, the final form of the reforms—and their impact on millions of homeowners—will become clearer. What is certain is that the bill signals a decisive move away from traditional leasehold towards a new model of residential property ownership.

For more information on Draft Commonhold and Leasehold Reform Bill talk to Nationwide Sureties