Government publishes draft Commonhold and Leasehold Reform Bill

Today, the government has published the draft Commonhold and Leasehold Reform Bill and launched a related consultation on banning leasehold for new flats. Together, the proposals represent one of the most significant overhauls of residential property law in England and Wales in decades.

The reforms form part of a broader policy drive to reduce financial and legal burdens on homebuyers and increase transparency in the residential tenure market.

Key proposals in the draft Bill

The draft legislation sets out a wide package of leasehold reforms, including:

• A cap on ground rents for existing residential leaseholds at £250 per year, with a planned transition to a peppercorn (nominal) rent after 40 years.
   
• New powers to restrict or ban the grant of long residential leases for flats, alongside a government consultation on moving to commonhold as the default tenure.
   
• Easier routes to convert existing leasehold buildings into commonhold, giving flat owners collective ownership and greater control over management and running costs.
   
• Abolition of forfeiture for relatively small arrears, replacing it with a fairer enforcement regime.
   
• Reform of estate rent charge enforcement powers affecting freehold estates.

The full draft Commonhold and Leasehold Reform Bill is available on the government’s website.

Consultation on banning leasehold for new flats

Published in parallel with the draft Bill, the government has opened a consultation on moving to commonhold: banning leasehold for new flats.

The consultation seeks views on:

• The scope and timing of any ban on new leasehold flats.
   
• Potential exemptions and transitional arrangements for developments already in progress.
   
• The financial and practical implications of making commonhold the standard tenure for new flats.

The outcome of this consultation will be key to how and when these changes are implemented.

What this means in practice

For existing leaseholders, the proposals could deliver long-term savings on ground rents and greater control over building management through commonhold. For many flat owners, the reforms also address long-standing concerns about saleability and mortgageability, where high or escalating ground rents have created problems.

For developers, lenders and investors, the proposals raise important questions around future financing structures, valuation models and transitional arrangements for developments already underway.

It is important to stress that the draft Bill and consultation do not change the legal position today. The proposals remain at an early stage and must still pass through consultation, pre-legislative scrutiny and Parliament before any reforms take effect.

For leaseholders currently considering a lease extension, enfranchisement or sale, the existing legal framework continues to apply. Delaying action in the hope of future reform is unlikely to be sensible, particularly where lease terms are falling, marriage value is approaching, or ground rent provisions are already affecting mortgageability or saleability.

Expert insight on the leasehold reforms

Jennifer Slater, head of leasehold advisory and enfranchisement, comments:

“The draft Bill and the consultation show a clear shift in the government’s long-term direction for residential property ownership. Capping ground rents and moving towards commonhold as the default for new flats tackles many of the long-standing challenges leaseholders have faced.

“What will really matter is how the detail is worked through in practice. Transitional arrangements and how existing developments are treated will make a big difference to how these reforms work on the ground.

“For now, the legal position hasn’t changed, and leaseholders should carefully consider whether to delay lease extensions or enfranchisement decisions on the assumption that future legislation will resolve current issues, as the changes are subject to consultation and amendment before they come into force, and it can take a long time for legislation to make its way through parliamentary processes."

If you have questions about how these proposals may affect your position, our team can advise. We will continue to monitor the progress of the draft Commonhold and Leasehold Reform Bill and the outcome of the consultation on banning leasehold for new flats, and will keep our clients updated as the proposals move towards legislation.