Major Leasehold Reforms on the Horizon: What You Need to Know

The government has published a draft Commonhold and Leasehold Reform Bill that could fundamentally reshape residential property ownership in England and Wales. If enacted, these proposals would introduce some of the most significant changes to leasehold law in decades.

Ground Rents to Be Capped

For millions of leaseholders currently paying escalating ground rents, relief may be on the way. The Bill proposes capping ground rents on existing residential long leases at £250 per annum reducing to a peppercorn after 40 years. The government is targeting 2028 for implementation.

This is welcome news for flat owners whose properties have become difficult to sell or mortgage due to high ground rent obligations. Investors and pension funds holding these income streams will, however, be watching developments closely.

The End of New Flat Leases?

Perhaps the most transformative proposal is the planned ban on granting new long leases of flats. Instead, commonhold—which grants flat owners outright freehold ownership with no time limit—would become the standard form of ownership for new developments.

Although commonhold has been available since 2002, reportedly, fewer than 20 developments in England and Wales have adopted it. The Bill introduces an updated legal framework designed to make commonhold more practical, including provisions for "Commonhold Sections" to accommodate mixed-use schemes.

Forfeiture to Be Abolished

The Bill also proposes abolishing forfeiture as a remedy for covenant breaches in long residential leases. In its place, a new enforcement procedure would be introduced, culminating where necessary in a court-ordered sale of the property.

What Happens Next?

The Bill is at an early pre-legislative stage and will undergo scrutiny by the HCLG Select Committee before a substantive Bill is issued. The government has also launched a consultation seeking views on scope, exemptions, timing, and transitional arrangements.

For a detailed analysis of the Bill's provisions and how they interact with existing legislation, including the Leasehold and Freehold Reform Act 2024, please read our full client alert.