Draft Leasehold and Commonhold Reform Bill: What it means for you

The Government published its draft Leasehold and Commonhold Reform Bill on Tuesday 27 January 2026, confirming a cap on ground rents for existing leases at £250 per year in England and Wales, with a glidepath to reduce ground rents to a peppercorn (effectively £0) after 40 years. The Bill also proposes banning the sale of new leasehold flats, accelerating a shift to commonhold so flat owners will own and manage buildings collectively without expiring leases.

Ministers also trailed wider changes that build on the Leasehold and Freehold Reform Act 2024 (LAFRA), including abolishing forfeiture (to be replaced by a separate enforcement regime) and making conversion to commonhold easier, which will be subject to parliamentary scrutiny over the coming months. These proposals arrive against the backdrop of a High Court judgment in late 2025, which dismissed a judicial review application brought by six major freeholders on the grounds that LAFRA measures, such as removing marriage value, capping ground rent inputs for valuation purposes at 0.1%, and limiting freeholders’ cost recovery breached their human right to derive income from property.

For leaseholders
The immediate headline is cost relief and greater control: the draft Bill provides for a statutory ground rent cap, a long-run peppercorn endpoint, and statutory framework geared toward commonhold, alongside earlier steps already implemented such as scrapping the two-year ownership rule for lease extensions, and widening Right to Manage (RTM) access in mixed‑use blocks to buildings with up to 50% commercial use. The proposal to abolish forfeiture will be welcomed by leaseholders, as forfeiture has long been criticised as a disproportionate remedy that can allow a landlord to take back the property entirely over relatively minor breaches. Transparency measures are also moving forward, with consultations to standardise service charge statements, curtail hidden insurance commissions and strengthen routes to challenge unreasonable costs. The reform timeline and exact commencement dates will depend on Parliament and implementing regulations.

For landlords and institutional freeholders
The proposals and the upheld LAFRA framework are consistent with the continuing structural shift in favour of leaseholders: the impact of reduced enfranchisement premiums due to the abolition of marriage value, the capping of ground rent inputs for valuation, and a move to each side bearing their own costs. The capping of existing ground rents at £250, with a 40‑year taper to peppercorn, will require reassessment of income projections and asset values for investors and freeholders, with sector voices already warning about impacts on investments and market certainty. The abolition of forfeiture will mean that careful finance/cash flow and debt recovery procedures are needed more than ever. The move to a commonhold structure as the norm will have implications for new developments, which will have to ensure that their schemes are structured appropriately for management by a commonhold association.

For managing agents and resident‑led entities
The trajectory is toward higher professional standards, mandatory redress schemes for freeholders who manage directly, and more prescriptive reporting on service charges and insurance arrangements, with consultations on mandatory qualifications and reform of major works (section 20) covering reserve funds and asset management planning. These changes aim to lift transparency and increase trust, while giving resident management companies and RTM companies clearer authority and accountability, reinforced by the recent commencement of RTM voting and cost rules.

If you would like to discuss anything or require assistance, please call the LEMS team today on 0113 207 0000.