Scope for change?

A landmark moment for leasehold reform

The government’s draft Commonhold and Leasehold Reform Bill (CLRB), introduced in January 2026, represents a significant step in reshaping the leasehold system in England and Wales. It signals a clear long-term ambition to move away from leasehold towards commonhold ownership. However, while the direction of travel is clear, the bill remains a draft and leaves considerable scope for change, both politically and legally.

The headline reform: capping ground rents

The bill’s most eye-catching proposal is a cap on ground rents at £250, reducing to a peppercorn after 40 years – effectively abolishing them over time. This would immediately benefit nearly one million leaseholders, with around five million gaining long-term certainty that their ground rent will never exceed the cap.

Despite its appeal, the proposal is not without controversy. The £250 figure is based on an assumed average flat value of £250,000 and may still be viewed as a modest outgoing for many property owners. At the same time, the reform involves a significant transfer of value from freeholders to leaseholders, raising questions about fairness and economic impact.

Legal challenges and uncertainty

The bill arrives against a backdrop of ongoing litigation linked to earlier reforms under the Leasehold and Freehold Reform Act. These challenges – based on the Human Rights Act – focus on whether reducing freeholders’ income streams and altering valuation rules unlawfully interferes with property rights.

Although an initial High Court challenge was dismissed, appeals are progressing and further action may yet reach the European Court of Human Rights. Similar arguments are likely to be deployed against the CLRB, particularly in relation to the ground rent cap, potentially delaying implementation and creating prolonged uncertainty for both leaseholders and investors.

Gaps and unintended consequences

The draft bill omits certain provisions included in earlier legislation, notably exemptions for voluntary lease arrangements where lower purchase premiums were agreed in exchange for higher ground rents. This absence could unfairly affect some leaseholders and investors.

There are also concerns about those who have already enfranchised their buildings and rely on ground rent income to recover costs. The proposed cap could disrupt these financial arrangements, highlighting the need for more nuanced treatment of different scenarios.

The challenge of moving to commonhold

While the transition to commonhold is straightforward for new developments, converting existing leasehold properties is far more complex. The CLRB does not introduce a dedicated conversion mechanism, instead relying on collective enfranchisement. This creates a risk that leaseholders may stop short after acquiring the freehold, undermining the broader policy goal of widespread commonhold adoption.

Why read on?

Behind the headline reforms lies a far more complex picture. The full article explores in detail how potential Human Rights Act challenges could reshape or delay the proposals, where key gaps in the draft bill may create unintended consequences for leaseholders and investors, and why the shift to commonhold is likely to be far more difficult in practice than policymakers suggest. It also examines the likely timelines, the relationship with earlier legislation and what all of this means for the future of leasehold reform in reality, not just in principle.

This is a shortened version of a full-length article previously featured in Property in Practice magazine. To read the full article, log in or register.