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In January 2026, the Government published the draft Commonhold and Leasehold Reform Bill (Draft Bill), together with an accompanying consultation. Following its inquiry, the Housing, Communities and Local Government Committee (Committee) published a report on the Draft Bill in May 2026, setting out its response and recommendations.
The Draft Bill proposes significant reforms to homeownership in England and Wales. The key proposals include ending leasehold ownership for new flats and replacing it with commonhold, capping ground rents in existing leases at £250 a year before reducing them to a peppercorn after 40 years and abolishing forfeiture as a remedy.
Commonhold vs leasehold
Commonhold is a way of owning a flat or other unit within a development outright as freehold. This differs from the more familiar leasehold system, under which a leaseholder owns the right to occupy a property for a fixed number of years while the building or land is usually owned by a separate landlord.
Under a commonhold system, each owner holds their individual property and is also a member of a commonhold association. The association owns and manages shared areas, such as hallways, roofs, gardens and parking areas.
Unlike leasehold ownership, commonhold has no diminishing term and no landlord. Decisions about the management, maintenance and running costs of the development are made collectively through the association. This is envisaged to give owners greater control and avoid some of the issues associated with leasehold ownership, including lease extension costs and the risk of forfeiture.
Commonhold has been available in England and Wales since 2004, but take-up has been very limited. The Draft Bill aims to remove barriers and make commonhold the default form of ownership for new flats.
The Committee shares the Government’s view of commonhold as the way forward but considers that the Draft Bill should go further. It recommends that where leaseholders collectively acquire the freehold of their building, it should automatically convert to commonhold unless the building collectively decides to opt out.
Ground rent reform
Successive governments have faced pressure to address the issue of ground rent in residential leases. Ground rent can cause difficulties for homeowners where review clauses and strict lender requirements make properties difficult to sell or remortgage.
Ground rent for most new long residential leases was abolished by the Leasehold Reform (Ground Rent) Act 2022, but many existing leaseholders remain liable.
The Draft Bill proposes capping ground rent for most existing leases at £250 a year, reducing it to a peppercorn after 40 years. The Committee questions the proposed 40-year transition, suggesting that a 20-year period could strike a fairer balance between leaseholders and freeholders. It also recommends bringing the £250 cap into force in late 2027, one year earlier than the Government’s proposed timetable.
End of forfeiture
The Draft Bill seeks to abolish forfeiture as a remedy for long residential leases. Under the current system, a landlord may, in certain circumstances, recover possession following a breach of the lease, regardless of the equity the leaseholder has built up. The remedy has long been criticised, particularly where the breach is minor or disputed.
In its place, the Draft Bill proposes a new lease enforcement system intended to be fairer and more proportionate, with appropriate safeguards and judicial oversight. Further detail is expected to be set out in secondary legislation.
The road ahead
The Government has yet to respond to the Committee’s recommendations, meaning the final shape of the legislation remains uncertain. However, there appears to be clear political momentum behind leasehold reform, with Andy Burnham reiterating the Government’s commitment to reforming the leasehold system in his first appearance at the despatch box.
If enacted, the reforms would represent one of the most significant changes to residential property ownership in England and Wales for a generation. Developers, landlords, lenders and homeowners alike will be watching closely as the Government considers the next steps and prepares the Draft Bill for Parliament. For now, the existing legal framework remains in place.
If you have any questions about how the proposed reforms may affect you, please contact Lorna du Sautoy or another member of our PPLE team.
