Policy language

The government’s language on leasehold reform remains forthright. Ministers speak of “bringing the feudal leasehold system to an end”, returning power to homeowners and making commonhold the default way to own a flat in England and Wales.

The draft Commonhold and Leasehold Reform Bill, published in January 2026, is the clearest expression yet of that ambition. But, as anyone working in property knows, ambition and delivery are two very different things. The detail matters.

The headlines are compelling: a £250 cap on leasehold-dynamics'>ground rents, reducing to zero after 40 years; a ban on selling new flats as leasehold; a clearer route for existing leaseholders to convert to commonhold; and the abolition of forfeiture.

These are significant reforms. If implemented properly, they could improve the position of millions of flat owners.

Government officials estimate that the leasehold-dynamics'>ground rent cap alone could benefit more than five million leaseholders. For those whose properties have become difficult, or even impossible, to sell because of onerous leasehold-dynamics'>ground rent provisions, meaningful reform cannot come soon enough.

However, there is an important piece of history that should not be overlooked.

Commonhold has been available in England and Wales since the Commonhold and Leasehold Reform Act 2002. Yet, more than two decades later, it has been used for fewer than 20 developments, comprising fewer than 200 units.

That is not simply bad luck. It reflects some deep-rooted structural reasons why developers, lenders, managing agents and other property professionals have historically found leasehold easier to operate.

It would therefore be optimistic to assume that changing the law will, by itself, make commonhold the preferred model overnight.

The management question

Perhaps the biggest practical question is who will actually manage these buildings.

Under commonhold, the freeholder disappears. The flat owners collectively become the commonhold association, a company limited by guarantee. Its directors, drawn from the residents, take on statutory responsibilities, including filing accounts, managing conflicts of interest and exercising reasonable care and skill.

The association can appoint a professional managing agent to deal with the day-to-day management. In reality, for anything other than the smallest and simplest blocks, professional management is likely to be essential.

But the draft Bill does not require it.

That distinction matters.

Managing a residential block is not simply a matter of collecting money and arranging repairs. There are statutory compliance obligations, health and safety considerations, insurance, contractors, major works, accounts, reserve planning, disputes and increasingly complex expectations from lenders and residents.

Putting those responsibilities onto volunteer directors without appropriate professional support could create problems rather than solve them.

There is a lesson here from other jurisdictions. Scotland and Australia, where apartment ownership operates under models with similarities to commonhold, have mechanisms requiring professional management for larger developments. The draft Bill does not currently go that far.

The protection gap

The government’s ambition is for commonhold to be more than simply an alternative form of ownership. It is intended to be a better one.

But the existing leasehold system, for all its faults, has built up decades of statutory protections for leaseholders. These include rights relating to service charge accounts, consultation on major expenditure and access to tribunal processes.

Commonhold owners will have rights to participate in decisions about their building and to challenge certain decisions through the tribunal system. But the framework does not simply replicate the protections that leaseholders have become accustomed to.

There is also an important point around commonhold contributions. These are expressly excluded from some of the protections introduced by the Leasehold and Freehold Reform Act 2024.

If commonhold is to become the preferred form of ownership, this needs careful consideration. Owners should not discover that, in moving away from leasehold, they have also moved away from important financial and consumer protections.

The risk of a two-tier market

There is also a potential market issue.

New flats may increasingly be sold as commonhold while the existing housing stock remains overwhelmingly leasehold. Conversion is possible, and the Bill proposes reducing the previous unanimity threshold, but conversion of existing developments will still take time.

That creates the possibility of a two-tier market.

A newly built commonhold flat could be perceived as simpler and more attractive than an otherwise comparable leasehold flat, particularly where the leasehold property has leasehold-dynamics'>ground rent or complex servicechargesorted.co.uk/blogs/digital-service-charge-management-vs-paper-based-systems'>service charge arrangements.

That could create a value gap between new commonhold properties and millions of existing leasehold homes.

For existing leaseholders, the concern is straightforward: will they be able to convert easily enough to avoid being left behind?

Enforcement of owners’ obligations

One of the less discussed issues is what happens when a unit owner simply does not pay.

Buildings still need to be insured, maintained and repaired regardless of whether every owner pays their share.

Under leasehold, the landlord has established mechanisms for recovering arrears. Forfeiture is one such mechanism, although its use is disproportionate in many circumstances and its proposed abolition is understandable.

Commonhold needs a practical alternative.

Under the existing commonhold framework, the association must generally pursue a defaulting owner through the courts or, in certain circumstances, seek to acquire the unit where contributions remain unpaid.

The latter mechanism is cumbersome, rarely used and poorly understood. The draft Bill does not appear to provide the kind of straightforward enforcement mechanism that a managing agent or residents’ association can rely upon when money is needed to keep a building functioning.

This is not an academic concern.

If one or two owners stop paying, the association still has to pay the insurance premium, maintain the lifts, repair the roof and keep the communal systems operational. The other owners either have to subsidise the shortfall or accept the consequences of underfunding.

A more effective mechanism is therefore needed. That could involve a streamlined planetrent.co.uk/blog/could-a-tax-tribunal-ruling-mean-btl-investors-avoid-3-stamp-duty-surcharge'>tribunal process, a statutory charge against the unit or some form of mandatory reserve fund.

Whatever the solution, the principle is simple: the association must have a realistic way of collecting money from those who owe it without spending months pursuing litigation it cannot afford.

What happens if the association becomes insolvent?

This is potentially one of the most significant structural risks.

A commonhold association is a company limited by guarantee. Like any other company, it can become insolvent.

The existing 2002 Act provides mechanisms for dealing with a winding-up, including the possibility of the commonhold arrangement being terminated and the land being transferred to a successor association or conventional freeholder.

But these provisions have never really been tested in practice.

That leaves some important questions unanswered.

What happens to the unit owners while the position is resolved? Who funds the management of the building? Who maintains the insurance? What happens to existing contracts? And how are mortgage lenders protected?

The risk will vary considerably between developments.

A six-unit converted Victorian building managed by its residents is very different from a 200-unit purpose-built development. Yet both could find themselves operating within broadly the same statutory framework.

If an association fails to maintain adequate reserves, takes on commitments it cannot meet or simply mismanages its finances, the consequences ultimately fall on the unit owners.

For those owners, there may also be mortgage lenders with charges over the individual properties. That makes the stability of the commonhold structure a lending issue as well as a management issue.

The absence of mandatory reserve fund requirements is therefore worthy of particular attention.

Leasehold has developed a number of mechanisms to deal with servicechargesorted.co.uk/blogs/digital-service-charge-management-vs-paper-based-systems'>service charge funds, expenditure and disputes. Commonhold should not be launched on the assumption that the residents will simply get it right.

None of this is an argument against commonhold.

The problems with leasehold are well documented. Escalating leasehold-dynamics'>ground rents can make properties difficult to sell. Forfeiture can be a disproportionate remedy. And the traditional landlord and tenant relationship does not always sit comfortably with the reality of owning a flat.

The direction of travel is therefore understandable, and in many respects welcome.

But commonhold is not simply a legal switch that can be flicked.

If it is to become the default form of flat ownership, the system needs to work in the real world: when residents disagree, when someone does not pay, when major works are required, when an insurance premium increases, when a managing agent needs instructions and, importantly, when the association itself gets into financial difficulty.

Those are the circumstances in which the strength of the legislation will really be tested.

The government wants to make property ownership simpler, fairer and more secure. Commonhold has the potential to achieve that.

But if the new framework is to command the confidence of owners, developers, managing agents and mortgage lenders, the practical questions around professional management, financial protections, enforcement, reserves, conversion and insolvency need to be addressed before the system is fully rolled out.

The objective is right. The challenge now is making sure the legislation is robust enough to deliver it.