2026 will mark a turning point, with a significant overhaul of leasehold property rights.
On 27 January 2026, the government published the draft Commonhold and Leasehold Reform Bill – a piece of proposed legislation that aims to cap ground rents, abolish the threat of losing your home over minor debts, and ultimately replace leasehold with a new model of ownership called commonhold.
With around five million leasehold properties across England and Wales, these reforms have the potential to affect a very large number of homeowners. Here is a summary of what leaseholders need to know.
What Are Ground Rents — and Why Are They Controversial?
A lease is essentially a long-term contract giving you the right to live at the property for a set number of years. The freeholder (your landlord) owns the building and in many older leases, you are required to pay them an annual charge known as a ground rent.
Ground rents have become one of the most contentious aspects of leasehold ownership. Sometimes, lease terms allow the ground rent to double every ten or twenty-five years, leaving homeowners with bills that spiral out of control and can make properties difficult to sell or remortgage.
The Leasehold Reform (Ground Rent) Act 2022 banned ground rents on most new leases but did not cover older leases with rising charges. The new draft Bill changes that.
The draft Bill proposes a two-stage cap on ground rents for existing residential leases. During a 40-year transitional period, ground rents would be capped at £250 per year. After that period expires, the cap would reduce to a peppercorn — effectively zero. The government has indicated that the ground rent cap could come into force by late 2028, subject to parliamentary approval.
A leaseholder whose lease requires ground rent of £500 per year, doubling every 25 years, would currently face a ground rent of £2,000 per year by Year 50. Under the proposed cap, they would pay no more than £250 per year throughout the 40-year transitional period, and a peppercorn thereafter — a potential saving of tens of thousands of pounds over the life of the lease.
The End of Forfeiture: No More Losing Your Home Over Small Debts
Under the current system, if a leaseholder falls behind on ground rent, service charges or materially breaches a lease, the freeholder can ultimately seek to “forfeit” the lease. That means the landlord terminates the lease entirely and takes the property back.
This can happen even where the debt involved is relatively small. At present, arrears as low as £350 can trigger forfeiture proceedings. For long residential leaseholders, the consequences can be severe: they risk losing both their home and the equity they have invested in it. This forfeiture is rarely used in practice but the threat of it still exists.
The draft Bill proposes to abolish forfeiture for all long residential leases. [In its place, a new system of “lease enforcement claims” would allow landlords to apply to the court for an appropriate remedy when a lease is breached — but the court would no longer be able to terminate the lease itself.
Where debts are owed, the most significant remedy available would be an “order for sale”, under which the property is sold, and the leaseholder keeps the equity that remains after the debt and costs are paid.
Importantly, the new system would also require landlords to follow a step-by-step process before they could take enforcement action. This would include serving formal notices, meeting minimum financial thresholds, and obtaining determination that a breach has occurred. The aim is to ensure that enforcement is proportionate, transparent and court supervised.
Commonhold: A Better Way to Own a Flat?
Perhaps the most ambitious element of the draft Bill is its plan to replace leasehold with “commonhold” as the standard form of ownership for new flats.
In simple terms, commonhold is a form of freehold ownership designed for residential and mixed-use buildings with multiple flats. Under commonhold, each flat owner owns their property outright with their own registered title number.
There will be no expiring lease and no ground rent, as all the owners collectively manage the shared parts of the building (such as hallways, the roof and communal gardens) through a residents’ company limited by guarantee called a “commonhold association”.
Commonhold has been available in England and Wales since 2004, but take-up has been negligible — fewer than 20 developments have adopted it — largely due to deficiencies in the original legislative framework.
The draft Bill replaces the old framework entirely, addressing the legal weaknesses that prevented commonhold from gaining traction. For example, by introducing “sections” to accommodate mixed-use buildings and by permitting shared ownership arrangements within commonhold for the first time.
The government also intends to ban the sale of new leasehold flats once the reformed commonhold system is up and running. A consultation on how to implement that ban closes on 24 April 2026. Existing leaseholders would also find it easier to convert their buildings to commonhold, with the required consent threshold reduced from 100% to 50% of leaseholders.
How Realistic Is All of This?
The Bill is currently in draft and is undergoing pre-legislative scrutiny by the Housing, Communities and Local Government Select Committee. It must still be formally introduced to Parliament, debated, potentially amended, and passed into law before any of these changes take effect.
The ground rent cap has a publicly indicated target of late 2028, but no firm dates have been given for the wider provisions, including the leasehold flat ban and commonhold reforms.
The transition to commonhold as the default tenure will also take time. The government has acknowledged that it will only implement the ban on new leasehold flats after the reformed commonhold framework has been brought into force.
What Should You Do Now?
- Review your lease terms: Check whether your ground rent is above £250 per year or subject to an escalation clause, so you can assess the likely impact of the cap on your position.
- Monitor the consultation: The consultation on the ban on new leasehold flats closes on 24 April 2026 — consider whether you or your organisation should respond.
- Assess your building’s suitability for commonhold conversion: If you are a leaseholder in a block of flats, consider whether the reduced 50% consent threshold makes conversion viable for your building.
- Take advice on existing disputes: If you are involved in forfeiture or service charge proceedings, the proposed abolition of forfeiture and the new enforcement regime may affect your strategy.
If you have questions about how commonhold and leasehold reform might affect your property, our Real Estate team would be happy to help.
