Leasehold to Commonhold - A New Era for Flat Ownership?

The Government recently took its most decisive step yet toward overhauling how flats are owned in England and Wales, having published the draft Commonhold and Leasehold Reform Bill on 27 January 2026. The proposals build on the 2024 reforms and aim to cap existing ground rents, abolish forfeiture and, in a historic shift, make commonhold the default tenure for almost all new flats.

Leasehold, long the dominant structure for flat ownership, has faced sustained criticism over escalating costs, opaque fees and limited control for residents. Ground rent abuses became a particular flashpoint, prompting ministers to propose a statutory cap of £250 per year, reducing to a peppercorn after 40 years.

The Bill also revives long-stalled plans to phase out new leasehold flats entirely, ensuring future developments adopt commonhold instead. This shift follows extensive Law Commission work and years of campaigning by leaseholder groups.

Under commonhold, flat owners hold their homes outright and jointly manage their buildings through an association - a model widely used overseas but rarely adopted in the UK. The government’s updated framework introduces clearer governance rules, mandatory reserve funds and new tools to support mixed-use developments, addressing many of the shortcomings that hindered earlier attempts to promote the model.

Industry reaction is mixed. Leaseholder organisations have welcomed what they call the long-overdue dismantling of “feudal” practices. Freeholders and some investors, however, warn of legal challenges, particularly around the ground rent cap, which they argue interferes with established property rights. Developers, lenders and managing agents also face a period of adaptation as commonhold transitions from a theoretical alternative to the expected default.

The Bill’s impact will not be immediate. It now enters pre-legislative scrutiny, alongside a live consultation on the detailed mechanics of banning new leasehold flats. Yet the direction of travel is unmistakable: a move away from diminishing lease terms and third-party control, toward a system where flat owners hold lasting ownership and direct authority over their buildings. For the five million existing leaseholders, this represents one of the most significant shifts in property rights for a generation.

Useful links…

Draft Commonhold and Leasehold Reform Bill

Consultation….Moving to Commonhold: Banning leasehold for new flats

Leasehold and Freehold Reform Act 2024

Commonhold White Paper of March 2025