Commonhold and Leasehold Reform Bill - key themes to note

The Bill represents "one of the most significant overhauls of property law in decades."

Except for sole commercial premises, it will impact most parts of the property sector. This will include residential development or mixed use acquisitions, real estate finance, site set up, plot and conveyancing documentation and due diligence, HMLR & Companies House process and conveyancing process. It will also impact on existing residential or mixed-use leasehold blocks and development that is currently being brought forward (mixed or residential).

This is a (non-exhaustive) list of some of the key themes.

Commonhold

Commonhold Community Statement (CCS) and commonhold association (CA)

The government anticipates commonhold will work as follows:

Residential unit owners own the freehold of their property and are members of the Commonhold Association

Common parts are owned and managed by the Commonhold Association

The CCS is the critical legal document that contains the legal obligations to which the commonhold unit owners must adhere in a commonhold building. It comprises (a) core standardised rules prescribed by statute and (b) a set of local rules specific to a building.
The core rules will include obligations to maintain, repair and insure the common parts of the commonhold building and include dispute resolution machinery.

Commonhold unit owners will be, as a rule of thumb, members of the CA. Where there are joint owners, both are entitled to be a member. Members of the CA have voting rights in relation to, for example, setting the service charge budget and local rules.
The CA will need to be created as a company limited by guarantee at Companies House which will ensure it has sufficient legal personality to hold title to the common parts.

Local rules

While the core CCS will remain the same for every commonhold building owners can add to it local rules that are unique to their building (for example whether pets are allowed, loud noise is prohibited or allowing holiday lets). These will vary from building to building and can be set by the developer at the outset and later added to or amended by the members of the CA. The voting threshold needed to amend a local rule is 75% of members who participate in the vote. Unit owners benefit from minority protection rules if they have been negatively affected by a change.

Development rights and development business

The Bill recognises developers must have rights to carry out or finish development.
These will be contained in the CCS (and are traditionally reserved in leases). These rights can only be used for "development business" (e.g. "the purpose of completing or executing works on the development or of marketing or selling commonhold units").

They can be challenged by a unit owner if they are of the view a developer is exceeding its remit. They can also be varied but only with the unanimous agreement of the developer and the members of the CA.

There are limits on how the rights can be exercised (e.g. they must not interfere with unit owners' enjoyment of their property and the developer must make good any damage as soon as possible).

Scheme handover

As currently drafted the Bill does not allow a developer to appoint its own directors. Handover of a completed development will occur when 50% or more of the commonhold units are sold. This will result in the new owners (and members of the CA) having control. Until then while a developer retains control of over 50% of the voting rights in the CA it will retain control.

Sections and mixed-use schemes

The Bill introduces the concept of "sections". Developers can use these to facilitate complex mixed-use development where it is necessary to separate different interests in the same commonhold (e.g. commercial and residential).

Sections allow a commonhold building to be subdivided for the purposes of its management and maintenance functions. The use of a section in a development can only be created for a "good reason" with more detail around this expected in regulations that will follow.

Developers will need to give thought to whether sections are appropriate at the outset of a new commonhold development.

Heads of costs

Developers will be able to set heads of costs depending on who is using services or assets in the development (e.g. exclusive use of parking). A Code of Practice will support best practice in this area.

Permitted leases

Certain types of leases will be able to exist within a commonhold structure. This is to accommodate shared ownership leases and lease-based financial products (e.g. home reversion plans and home purchase plans such as Islamic/Sharia compliant finance).

Where leases are permitted within a commonhold structure leasehold statutory service charge protections currently enjoyed by tenants will not apply because the commonhold structure will provide sufficient protections.

Directors

As a company limited by guarantee the CA will have articles of association that deal with the appointment of directors.

Directors of the CA will play a key role and have significant responsibility for managing building safety. A CA can have no less than 2 directors who can be unit owners, other members, or professional directors.

In the absence of anyone taking on the role the Bill allows for the unit owners to appoint professional directors. If this is not agreed then other interested parties (unit owners, permitted leaseholders and mortgage lenders) can apply to the tribunal for the appointment of a professional director.

Insurance

It will be mandatory for a CA to take out buildings insurance and public liability insurance.

In addition, regulations will allow the CCS to take out directors and officers insurance, and guidance will be provided to help protect the unit owners against the threat of insolvency of the commonhold scheme.

The government has said it will publish guidance aimed at helping commonhold directors consider the risks against which insurance should be obtained.

Commonhold budget, reserve funds, and emergencies

The repair and maintenance, insurance, and services for the common parts of a commonhold scheme will be funded through an annual budget, approval of which will be subject to a yearly vote by the CA before it can be approved. If a budget is not approved, then the previous year's budget will roll over.

The commonhold directors will have the ability to include additional budget items throughout the year if it is necessary for emergency items or unexpected costs. The circumstances where directors can use these powers will be subject to further guidance.

It will be mandatory for CAs to establish and operate at least one reserve fund that will be held on statutory trust that can only be used to meet obligations under the CCS. This includes ensuring the level of the fund is sufficiently proportionate for the commonhold building by undertaking periodic reviews.

Emergency costs to the commonhold can be funded either through sales or fixed or floating charges. There will be controls around using these and whether they are appropriate solutions.

It is intended the government will publish guidance on all aspects of buying and selling, and living in commonhold as well as being a director of a CA.

Event fees payable on change of ownership of units will be prohibited but retained in the case of retirement commonhold schemes.

Repair

Unit owners will be required to maintain their units and services to a standard that does not adversely affect their neighboring members’ property although this may be subject to change through a local rule.

Buying and selling commonhold units

The seller of a commonhold unit will need to provide a Commonhold Unit Information Certificate. There is a cap on the cost of providing this and the certificate will contain key information about the property. It will also deal with any outstanding arrears for which a buyer will become liable. The government anticipates the form of the notice will be amended and reissued.

Conversion to commonhold

The government is clear that it wants to support existing leaseholders to convert to commonhold. It has made this easier by providing that if 50% of the leaseholders in a building agree to convert then it can proceed.

Before converting to commonhold leaseholders must first acquire the freehold of their building through collective enfranchisement.

It is not compulsory for all leaseholders in a building to participate in the conversion process (those not participating are referred to as non-consenting leaseholders). Although the leases of non-consenting leaseholders will remain they will be adapted to fit with the commonhold regime (e.g. loss of service charge protection).

The continuation of non-consenting leaseholders is only intended to be temporary. A leaseholder in these circumstances will be required to convert when they either wish to extend their lease or sell their unit. In the case of the former this is because when the building converts to commonhold a non-consenting leaseholder will lose the right to extend their lease but obtain the right to buy the freehold of their commonhold unit.

If a non-consenting leaseholder wishes to sell their property they will need to sell as a commonhold unit. The government will publish further details around this.

Sale of new flats

Prohibition

Where flats can be delivered as commonhold, the government says it believes that they should be. The Bill introduces a statutory ban on the grant of new long residential leases in both new and existing buildings. This means that, from the date this part of the Bill comes into effect, new flats will need to be sold as commonhold rather than leasehold, unless an exemption applies.

Owners of existing leasehold flats will continue to be able to sell them or extend them.

Where an exemption is relied upon, this will need to be made explicit during the marketing, sale and registration process along with clear evidence of why the flat falls within an exemption. Any mis-selling or failure to provide the correct information in the lease or at registration will entitle the purchaser to redress and allow them to acquire the flat as a commonhold flat in most cases.

The prohibition will apply to:

Development of a new block of flats sold for home ownership;

• Conversion of houses into flats
• Conversion of commercial buildings into flats (including mixed development)
• Purpose built blocks of flats that were used, for example for student accommodation but are repurposed and sold for home ownership
• Other residential buildings that are refurbished and flats sold for home ownership

The following buildings are excluded from the ban:

• Purpose-built rental blocks (e.g. Build to Rent, social rented housing, student accommodation) not used for homeownership

Because of the need for stakeholder engagement the government has said:

• The date of the ban
• Transitional arrangements
• The final form of exemptions

are not currently included in the draft Bill.

Enforcing the ban

This will be achieved through checks at the following stages in the conveyancing process:

• Marketing – a prohibition on advertising flats for sale on long leases
• Sale – before exchange of contracts the issue of a warning notice for any exempt flat
• Registration – the registration of any long lease will need a prescribed statement confirming it complies with the legislation. If it does not HM Land Registry will place a restriction on title that will prevent its sale

Non-compliance can result in a fine or series of fines ranging from £500 to £30,000 to reflect consumer losses. The total amount of the fine can rise substantially if multiple breaches are committed (e.g. where multiple flats in the same building are mis-sold).

A lead enforcement authority will be appointed by the Secretary of State.

Moving to commonhold consultation

It has been confirmed that this part of the Bill will not be brought into force until the reformed commonhold framework is fully operational, to ensure the market is ready for the changes.

The government is seeking views from the industry and consumers on the plan to introduce the ban on new leasehold flats. The consultation runs from 27 January 2026 until 24 April 2026 and invites feedback on the operation and scope of the ban, proposed exemptions, timings and costs as well as the commonhold framework itself.

Ground rent

The Bill extends regulation of ground rents beyond the Leasehold Reform (Ground Rent) Act 2022 by capping ground rents in existing long residential leases at £250 per year, with a statutory reduction to a peppercorn after 40 years. This represents a significant recalibration rather than total abolition, aimed at balancing leaseholder protection with freeholder property rights.

The cap will apply broadly across qualifying leases with some limited exemptions (in particular for business leases, community housing leases and home finance plan leases). It is not intended that these measures will apply retrospectively so landlords will not be required to reimburse leaseholders for ground rent received before the cap comes into force. Government materials indicate that implementation could arrive in late 2028.

Abolition of forfeiture

The remedy of forfeiture, which allows a landlord to terminate a long residential lease if the leaseholder is in breach of its terms has widely been criticised as outdated, disproportionate and unfair. The Bill abolishes forfeiture for both new and existing long residential leases. In its place, the Bill introduces a new lease enforcement scheme, requiring landlords whose leaseholders are in breach of their obligations to apply to the court which will decide the most appropriate and proportionate remedies. Certain breaches will be excluded from the scheme, including ground rent arrears and other non-payment breaches below a specified threshold, which will be set following consultation between £500 and £5,000. For small debts or ground rent arrears, landlords will no longer have the right to forfeit but can continue to use civil debt recovery processes.

Available remedies include compliance orders, damages and, in rarer cases, court ordered sale of the lease, with protections to ensure the leaseholder is compensated for any remaining equity.
Leasehold

The government points out that the new regime is designed to balance the rights of individual leaseholders with the interests of other residents in a building, with landlords retaining strong enforcement powers (subject to meeting statutory conditions).

Estate rentcharges

Estate rentcharges are used to recover costs from freehold owners for maintaining shared amenities within a privately managed estate. Some estate rentcharges currently benefit from enforcement powers including the ability to take possession, grant a long lease to trustees (which might continue after the arrears are paid) and appoint a receiver with mortgagee-like powers to recover even relatively small arrears. The Bill repeals or significantly restricts these remedies, replacing them with recovery mechanisms more akin to the new lease enforcement principles in the Bill, while preserving the ability to recover legitimate estate management costs.

Further Reading:

• Commonhold White Paper: The proposed new commonhold model for homeownership in England and Wales – updated 19 March 2025
• Guidance Guide to the Draft Commonhold and Leasehold Reform Bill – January 2026
• Consultation - Moving to commonhold: banning leasehold for new flats – 27 January 2026
• Explanatory notes to Bill – January 2026
• Draft Commonhold and Leasehold Reform Bill – January 2026