Simon Brooks, partner at law firm Browne Jacobson, examines the draft leasehold legislation and considers what it will mean for leaseholders, the housing market and the housebuilding industry
The Government’s draft bill proposing a £250 cap on ground rents, a ban on new leasehold flats, and a revamped commonhold system represents a significant proposed reform to property tenure. The draft Commonhold and Leasehold Reform Bill was published on 27 January 2026 and is undergoing parliamentary scrutiny. Angela Rayner has warned that freeholders may “resort to lawfare” to block the measures, and the Residential Freehold Association has described the ground rent cap as “a wholly unjustified interference with existing property rights.”
Those working in the housing and housebuilding industries will need to look beyond the headlines. Landmark legislation of this kind rarely arrives without unintended consequences, and a careful assessment of the practical implications is warranted.
Ground rent reform: The proposed changes
Ground rents in new leases have already been banned since 30 June 2022 under the Leasehold Reform (Ground Rent) Act 2022. That legislation did not apply to existing leases, and leasehold reform campaigners have argued that many existing leaseholders continue to be affected by onerous ground rent provisions, particularly those subject to escalation clauses that increase rents beyond the rate of inflation. It is worth noting that views on the impact of those provisions vary: what some regard as onerous, others have characterised as a legitimate feature of the investment arrangements under which developments were financed and built.
The new proposals address existing leases directly. Selling a lease with ground rent has in many cases become difficult without first approaching the landlord for a deed of variation, a process that can be lengthy and expensive. A reduction in ground rents, if implemented, could have a positive effect on transaction volumes and market fluidity.
Ground rent investors will view the proposals differently. Many paid significant sums for portfolios of these investments. The prospect of income being capped at £250 per unit and ultimately reduced to a peppercorn after forty years is widely expected to prompt legal challenge. The Human Rights Act, on the basis of alleged unlawful deprivation of property, has been identified as the most likely avenue, and Rayner’s pre-emptive reference to “lawfare” in the Commons indicates the Government anticipates this response. The forty-year phased reduction appears designed to allow investors time to recoup their outlay before the income disappears entirely. Whether courts would regard that as adequate remains to be determined.
It is also worth noting that the market had already begun to adjust before the 2022 Act. Since reform was first signalled in 2021, some mortgage lenders had begun refusing to lend against leases with ground rents above certain levels or above-inflation escalators, and investor appetite had softened accordingly.
A further practical consideration is the pace of implementation. Much of the Leasehold and Freehold Reform Act 2024 has yet to be brought into force, more than eighteen months after it received royal assent. For leaseholders and the wider market, the timing of implementation will be as important as the content of the reforms themselves.
Commonhold: The proposed new tenure
The proposed reform of commonhold tenure introduces more structural complexity, and the housebuilding industry will need to consider the implications carefully.
Under the proposals, flat owners will own their property outright and will share ownership of the building and its common parts through a commonhold association. The draft bill also proposes to abolish forfeiture for existing leases, the mechanism by which, in theory, a leaseholder can lose their home and accumulated equity over unpaid rents and breaches of lease covenants. Supporters of commonhold argue that it offers a more secure and transparent form of ownership; others have raised questions about how it will function in practice.
One question is whether a two-tier market could develop between new commonhold properties and existing leasehold stock. Conversion from leasehold to commonhold is intended to be made easier under the proposals, but the extent to which leaseholders will in practice undertake that process, bearing in mind existing rights to manage, remains uncertain.
On building management, Justin Herbert of Residential Management Group has put forward the case for a blended model in which residents retain control over key decisions while experienced managing agents retain responsibility for building safety and regulatory compliance. The Government’s proposals on this point will be an area to watch as the bill develops.
For developers, a key practical question concerns phased developments. Under the current leasehold model, developers typically retain control of building management until the final unit is sold. How commonhold would function in that context, once a significant proportion of units have transferred and control of the commonhold association has shifted, is an area that will require careful consideration as the legislation is developed further.
Transition and implementation
One of the more immediate practical effects of the legislation, if enacted, is the adjustment it will require from the conveyancing profession. Conveyancers have built up significant expertise in leasehold transactions over many decades; but very few have experience with the existing commonhold tenure. The proposed revisions and compulsory use of the commonhold tenure will involve a period of adjustment. Increases to transaction timelines and professional fees is a reasonable expectation.
Those working in the housing market and housebuilding industry will need to monitor the bill’s progress through Parliament carefully and consider how the proposed changes, particularly around commonhold, may affect development, management and conveyancing practice. For an industry already grappling with the impact of recent reforms on building safety, viability issues and the pressures of meeting increasing house-building targets, the significant changes envisaged by the draft bill may be an unwelcome additional burden.
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