On 27 January, the UK Government published a draft Commonhold and Leasehold Reform Bill intended to modernise residential property tenure, strengthen protections for homeowners, and transition away from the traditional leasehold system for flats. The reforms form part of a long-running programme to overhaul what many see as an outdated and unfair leasehold regime.
The Prime Minister announced the ground rent cap in a video posted on social media, saying the reforms would keep more money in the pockets of families and help ease cost-of-living pressures. Housing Secretary Steve Reed said the reforms would rebalance the relationship between landlords and leaseholders, tackling what he described as an “outdated and unfair system” that has, for too long, impaired the dream of homeownership for many. Minster for Housing and Planning Matthew Pennycook is to announce the new Bill in Parliament later today.
According to government officials, the cap is expected to benefit more than five million leaseholders. It could also unlock stalled property sales that have been hampered by onerous ground rent terms that deter lenders or buyers.
The key takeaways
- Capping and phasing out ground rents
A central reform is the cap on ground rents for existing leasehold properties at £250 per year, with ground rent converting to a peppercorn (zero) after 40 years under the proposed regime. This is designed to end excessive and unaffordable ground rent charges that can make properties hard to sell. The anticipated cap will be introduced in late 2028.
- Ending forfeiture for small debts
The Bill would abolish the threat of forfeiture (where a home can be lost over small breaches such as unpaid ground rents or service charges) and replace it with a fairer enforcement regime for lease breaches that balances the interests of homeowners and landlords.
- Ban on new leasehold flats
A transformational element of the Bill is the ban on selling new flats as leasehold once the reformed commonhold model is in place. Instead, new residential flats will generally be sold as commonhold — a form of ownership where residents collectively own and manage the building.
- Making commonhold the default tenure
The Bill supports government plans to reinvigorate commonhold by simplifying its structure and making it easier for developers to use commonhold for new build flats. Commonhold ownership gives residents landlords’ former powers, such as setting budgets and service charges collectively.
- Easier conversion to commonhold
Existing leaseholders will be given a clearer and more accessible pathway to convert their buildings to commonhold. The draft legislation proposes reducing the consent threshold so that conversion doesn’t require unanimous agreement from all leaseholders (e.g., reducing from 100% to a lower level).
- Estate rent charges and enforcement powers
The Bill proposes to repeal harsh enforcement powers attached to estate rent charges on freehold properties, helping protect homeowners on estates from heavy-handed enforcement by third parties.
- Supporting existing leaseholder rights
Although the focus is on longer-term reform, the Bill builds on existing statutory protections by supporting measures intended to improve leaseholders’ rights, such as:
- Transition arrangements easing lease extensions, and
- Stronger transparency and redress requirements for managing agents and landlords (in practice through related statutory reforms rather than the Bill itself).
While consumer groups and leaseholder advocates have broadly welcomed the changes, industry voices, including major investors, have expressed concern about the retrospective nature of the reforms and their implications for existing contracts and investment in the UK housing market.
A consultation is now open, running until April 2026 and those who would like to express an interest, should do so.
If you have questions or concerns about the Bill or the consultation, please contact Katie Cohen.