What we know about the upcoming Commonhold and Leasehold Reform Bill

The government published the Commonhold White paper on 3 March 2025, which Housing Minister Matthew Pennycook heralded in the press release as “the beginning of the end for the ‘feudal’ leasehold system”.

The press release says this will involve the introduction of a comprehensive new legal framework for commonhold by the end of this parliament (by 2029), after which new leasehold flats will be banned. This will make commonhold the default tenure within four years.

Bringing leasehold to an end isn’t a simple task, and commonhold isn’t an easy fix. This is why the Commonhold White Paper concentrates on making it compulsory for new developments, and they are still working on an easier way to convert existing leaseholds to commonhold.

This subject will be important to the 5 million leaseholders in England, 1.8 million of which are private landlords who let the property to tenants under a tenancy agreement. Leasehold properties equate to 38% of the 4.9 million properties in the private rented sector in England.

In this blog post, I go through the three key parts of what is likely to be in the draft Leasehold and Commonhold Reform Bill: abolishing forfeiture, regulating ground rent, and replacing leasehold with commonhold. This includes explaining the differences between leasehold and commonhold, the reasons why commonhold has not been popular in England, and what the next steps are for the reform of commonhold.

I start with the latest news on the publication of the draft Commonhold and Leasehold Reform Bill.

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The latest on the draft Commonhold and Leasehold Reform Bill

The Commonhold White Paper said the government would “publish a draft Bill in the second half of 2025 for pre-legislative scrutiny” and then a final Bill will be presented to parliament in 2027, a view to it coming into force by the “end of this parliament”. That means before the next election, due by summer 2029.

However, in a letter on 18 December 2025 to the Chair of the Housing, Communities and Local Government Select Committee, the Housing Minister, Matthew Pennycook, stated that “due to unforeseen delays, we will not be in a position to publish the draft Bill and accompanying consultation on banning the use of leasehold for new flats before the Houses rises for Christmas Recess.” He did not explain what the “unforeseen delays” were, and referred to it as a “slight delay”.

Matthew Pennycook added “we expect to be in a position to publish the draft Bill for scrutiny early in the new year.”

1. Where we are with commonhold

What does leasehold mean?

Before I talk about commonhold, it’s useful to have a recap on what leasehold actually means.

When someone buys a flat in England and Wales at present, they might think that they are the owner of the flat. However, as they will be a leaseholder of that flat, they’re in a landlord and tenant relationship with the company or person who owns the freehold of the building that the flat is in. Some houses are also leasehold, and they too will not truly “own their house”.

Consequently, what leaseholders have is a right to live in that flat or house for a specific amount of time (usually 99 or 125 years) on the terms set out in a lease. A leasehold property is therefore a time-limited “wasting asset” in that its value tends to fall over time as the unexpired time on the lease reduces. The leaseholder will eventually need to extend the lease or buy the freehold in order to keep the property. The leaseholder will need to pay the landlord to do this, and it’s currently a complicated and expensive process.

Leaseholders pay a service charge and possibly ground rent to the freeholder, and must comply with terms of the lease. The service charge may include a profit element for the freeholder as it’s common for the freeholder to receive a commission from the insurance company.

They risk having the lease forfeited if they do not pay the service charge or ground rent.

Additionally, leaseholders often don’t have the same control over their home as freeholder. They need to obtain consent from the freeholder to let the property, to sell the property and make certain alterations, which invariably involves paying the freeholder a fee. When I sold my flat in 2022, I had to pay the freeholder £400 for the “management pack” of 10 standard pdfs.

The lease may also ban the flat owner from having a pet.

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What is commonhold?

The Commonhold White Paper defines commonhold as follows: “Commonhold ownership is a form of freehold ownership where individual property owners each own their unit outright, with no expiring term”.

How does commonhold differ from leasehold?

Unlike leasehold, commonhold is a form of freehold property ownership introduced by the Blair government in the Leasehold and Freehold Reform Act 2002. Commonhold enables flats in a building or development to be owned on a freehold basis. The owner of a commonhold flat is the “unit holder”, owning the freehold of their home.

The unit holder is also a member of commonhold or residents’ association which owns and manages the common parts of the property for all of the unit holders.

With commonhold, there is no lease, and the commonhold association decides how to manage the property. It is an alternative way of owning a flat which avoids the shortcomings of leasehold ownership. For larger blocks, the unit holders wouldn’t carry out the day-to-day management themselves, but would instead appoint agents to manage it for them. However, it would be the unit holders (rather than an external freeholder) who would control the appointment and management of those agents.

Commonhold is along the same principles as “strata” or “condominium” titles that are used in the USA, Canada, Australia, New Zealand and across Europe to enable flats to be owned on a freehold basis.

The Law Commission summarised the benefits of commonhold over leasehold in their 2020 report Reinvigorating commonhold: the alternative to leasehold ownership:

Why has commonhold not been popular?

If commonhold is so good, why has the take-up has been low since it was introduced a decade ago, with a under 20 commonholds having been created since then?

The GOV website says the unpopularity of commonhold is due to the fact that “the more established leasehold model can generate additional income streams for developers or investors, such as through ground rents”.

The Law Commission pointed to the practical problem involved in obtaining the consent of everyone with an interest in the property, which includes the leaseholders, freeholders and mortgage lenders, in order to convert a building or development to commonhold. “In practice this will be almost impossible to achieve, especially in larger buildings”.

They also listed a number of issues with running commonhold associations, such as the lack of enforcement powers to recover commonhold costs, the lack of flexibility in the apportionment of costs, and concerns on the part of mortgage lenders in the event of the insolvency or voluntary termination of the association.

The Law Commission also said that commonhold needed flat owners to be ready to “accept responsibility” and “be ready to take on that cultural change” moving from “an ‘us and them’ mindset, towards ‘us and ourselves'”.

The road ahead for commonhold reform

The 2024 King’s Speech said “The commonhold legal framework is out of sync with modern development methods, and the current rules around conversion from leasehold to commonhold are unworkable”.

The Commonhold White Paper sets out the government’s plans to “reinvigorate commonhold by reforming the legal framework to make it both a preferred and workable alternative to leasehold”. They will also consult later in 2025 on “the best approach to banning new leasehold flats”.

The next step will be the publication of a new draft Commonhold and Leasehold Reform Bill by the end of 2025. Here is a link to which of the proposals of the Law Commission will be in the Bill.

When will leasehold be abolished?

In a House of Commons debate on 2 September 2024, Matthew Pennycook, Housing Minister, referred to “the many failings of the feudal leasehold system” and said they “finally intend to end it by the end of this Parliament”. This means by the time of the next General Election in 2029.

This is a very tight timescale, and I would not be surprised if it slips.

2. Ending the right for freeholders to forfeit a lease

What does lease forfeiture involve?

Leases invariably contain a provision that enables the freeholder to bring the lease to an end and recover possession if the leasehold breaches the covenants in the lease. This is called forfeiture, and is governed by Section 146 of the Law of Property Act 1925.

However, Section 167 of the Freehold and Commonhold Reform Act 2002 prevents the freeholder from serving a Section 146 notice for non-payment of ground rent, service charges or administration charges unless they total more than £350, or have been outstanding for more than three years. Under Section 168, the freeholder cannot use forfeiture unless the leaseholder has admitted that the money is payable or a court, or First-tier Tribunal (Property Chamber) or arbitrator has made a final decision that the breach has occurred.

This means that if a leaseholder refuses to pay a small sum for more than three years that they have admitted is payable, the freeholder can forfeit the lease. There is no set-off, so the leaseholder would lose the entire value of the lease, even if it is worth significantly more than the money they owe to the freeholder.

Labours plans to end lease forfeiture

The notes to the 2024 King’s Speech state: “Leasehold law unfairly rewards the landlord with a windfall when they take possession of a property through forfeiture. Many more leaseholders are, however, threatened with forfeiture and the loss of their home for low outstanding sums (as little as £350, or less if outstanding for more than three years), which can cause significant distress. Landlords need an effective way to recover debts but the fact this can happen over what might be a small breach underlines its draconian nature”.

The Leasehold and Commonhold Reform Bill will include provisions which would end the right for freeholders to forfeit a lease.

The government have not given any details about how they would end forfeiture, or whether there will be any exceptions, but the following amendment was proposed by Matthew Pennycook (now Labour’s Housing Minister) when the Leasehold and Freehold Act was going through parliament. The explanatory statement said: “This new clause would abolish the right of forfeiture in relation to residential long leases in instances where the leaseholder is in breach of covenant”.

3. Tackling ground rent on existing leases

The Conservative Party promised in their 2019 election manifesto to “restrict ground rent to a peppercorn”. However, although the The Sunday Times ran a story on 21 April 2024 saying that ground rent would be capped at £250 pa for 20 years, it never became part of what is now the Leasehold and Freehold Reform Act 2024, due to the rumoured opposition by the Treasury.

The Labour Party have been more coy about their plans for ground rent, saying in the 2024 King’s Speech briefing notes that they will “tackle” existing ground rent “by regulating ground rents for existing leaseholders so they no longer face unregulated and unaffordable costs”.

In Matthew Pennycook’s written statement of 21 November 2024, he said that the “government remains firmly committed to its manifesto commitment to tackle unregulated and unaffordable ground rents” in primary legislation, but did not explain how they would do this, eg by abolishing them altogether or restricting them to a specific sum such as £250 a year.

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