Key Takeaway

In January 2026, the UK government published the Draft Commonhold and Leasehold Reform Bill, signalling significant changes to the traditional leasehold system are on the horizon.  

The reforms contained within the bill - currently in the draft phase and subject to scrutiny - are expected to impact the residential and mixed-use property markets once enacted. In this article we discuss what the reforms could mean for developers, freehold landlords and investors, and strategies to prepare.

What Changes are Proposed under the Commonhold and Leasehold Reform Bill?

Leasehold remains the dominant form of ownership for flats in the UK. While commonhold was introduced in 2002, very few commonhold schemes have been built to date, with developers and investors favouring leaseholds for their long-term ground rent income and strong enforcement mechanisms.  

The new draft legislation now seeks to make commonhold the default tenure. Key proposals include:  

• Ban on New Leasehold Flats: Granting and assigning new long residential leases (exceeding 21 years) will be prohibited across certain properties.

• Capping Ground Rents: The reduction of all ground rents to £250 per annum, until the removal of ground rent payments after 40 years.

• Abolishing Lease Forfeiture: The remedy of forfeiture will be abolished for long residential leases, and replaced by what has been described as a more proportionate, court-based “lease enforcement claim”.

When is the Commonhold and Leasehold Reform Bill scheduled to be Implemented?

The Bill is undergoing pre-legislative scrutiny, with consultations until April 2026. While the ban on new leasehold flats is set to be phased in to allow market adaptation, the ground rent caps are widely expected to take effect by late 2028.

Implications of the Commonhold Reform Bill for Freehold Landlords and Investors

The draft Bill introduces valuation and management considerations for investors and freehold landlords with an existing portfolio of freehold properties. As the proposed £250 cap on ground rents would reduce returns for portfolios reliant on this income, investors should be prepared to review their assets and calculate exactly how this will impact their long-term revenue.  

Equally significant is the proposed abolition of the remedy of forfeiture where a leaseholder is in default. Under the Bill, freeholders would be prohibited from relying on a leaseholder’s breach to terminate a long residential lease and repossess the property.  

Instead, “the lease enforcement claim” will require a determination of the breach be obtained via the courts, in response to which the court will have the power to make a "remedial order", “order for sale”, and/or a "costs order".  

Transitioning to a statutory lease enforcement claim means the potential for longer, court-led recovery processes. Much like preparing for the incoming high-value residential property mansion tax,  property owners will benefit from a review of their existing portfolio to assess the impacts of these changes.

What Do Investors and Developers Need to Consider?

A shift to commonhold presents new challenges and new flexibilities for developers and investors. The government has addressed the flaws of the 2002 Act, legislation that was criticised within the property sector for being commercially unviable, and among leaseholders for the difficulty in navigating its rigid conversion rules.  

Under the new Bill, developers can reserve rights for certain “development business” within the Commonhold Community Statement. While available to schemes of all sizes, this is important for large developments, enabling them to be built and sold in phases, without requiring unit holder consent at every stage.  

The Bill addresses complex buildings by allowing commonhold schemes to be divided into “sections” with separate cost heads, paving the way for mixed-use developments. While the proposed ban on new leasehold flats targets residential tenure, the integration of commercial units within a commonhold structure will require documentation be carefully drafted to ensure commercial tenants and residential unit holders are managed harmoniously.  

For pure commercial acquisitions, the usual due diligence when purchasing UK Commercial Property continues to apply. Our key considerations when investing in property as a joint venture also remain relevant to investors and developers forming a PJV.

How Can Freeholders and Investors Prepare for Commonhold and Leasehold Reform?

Preparing for a transition away from leasehold requires a proactive approach that includes:  

• Assessing Your Existing Portfolio: Identify properties where ground rents exceed the proposed £250 cap and reassess their capital value, alongside reviewing your recovery strategies in anticipation of lease forfeiture abolition.  

• Considering the Impact on Future Developments: Assess how planned residential flat developments could be structured as commonholds, or whether they could fall within an exemptions, currently proposed to include purpose-built “Build-to-Rent" blocks, student accommodation, and shared ownership schemes.  

• Engaging with the Consultation: The government is actively consulting on the scope of the leasehold ban and potential exemptions until April 2026, with developers and investors encouraged to engage with the consultation process and identify necessary commercial safeguards.

Barnes Law advises developers, investors and property owners on real estate transaction structuring and strategy and are closely monitoring the progression of the Bill. Contact the Real Estate team at Barnes Law for advice on the impacts of commonhold and leasehold reform on your existing and future portfolio.

Written by Barnes Law Managing Partner, Yulia Barnes.

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