Leasehold Reform: What This Draft Bill Actually Means
The Government has released the Draft Commonhold and Leasehold Reform Bill, outlining some of the biggest proposed changes to leasehold in decades.
The direction is positive, but the industry is clear that the fine print, the timelines and the delivery will determine whether this actually works.
1. Leasehold on most new flats looks finished
The plan is to stop long leases on new flats, with only a few exceptions such as specific shared ownership arrangements. Trading Standards would enforce the rules through penalties and buyer protections.
2. Commonhold is being rebuilt
Commonhold has never taken off. This Bill tries to fix that by tightening governance, improving budgeting rules and making the structure more practical for large or mixed use blocks.
It also removes the requirement for everyone in a building to agree before converting, which has been the main barrier for decades.
3. Ground rents capped
Older long leases that still charge ground rent would face a cap of £250 a year, before moving to a peppercorn after 40 years. This mainly helps the 770,000 to 900,000 leaseholders paying the highest ground rents today.
4. Forfeiture removed
The current option that allows a freeholder to take back a property over arrears is being abolished. A new court based approach replaces it. Estate rentcharge enforcement powers are also being rolled back.
5. No dates, no certainty
This is still a draft. Key decisions on timing and implementation will come later. Nothing has a confirmed start date.
Industry reaction: cautious and varied
• ALEP: Supports reform but stresses it must be practical, balanced and shaped with industry involvement.
• British Property Federation: Warns the rent cap could impact pension fund investments and raises concerns about unclear compensation.
• Propertymark: Notes rising ground rents already make leasehold sales harder, so the cap removes a major barrier.
• Forsters LLP: Sees potential in commonhold but highlights operational complexity, especially in mixed use blocks.
• RICS: Views the Bill as a significant and welcome step forward.
• Spector Constant and Williams: Points out that only a minority of leaseholders will see major financial benefit, but those affected gain meaningful relief.
• HomeOwners Alliance: Welcomes the approach but stresses none of this is law yet, and delays remain possible.
• Irwin Mitchell: Expects legal challenges, particularly from large freeholders and pension funds.
• Howard Kennedy: Warns that rewriting long standing lease contracts may unsettle institutional investors.
A quieter point worth noting
Most freeholders and managing agents run fair operations. The more aggressive language in recent debates does not represent the whole market.
Some buyers were not properly advised on ground rent terms at purchase.
Any compensation to freeholders would ultimately be funded by taxpayers.
And despite renewed interest, commonhold has only been adopted around 20 times since 2002.
Source: The Negotiator