Commonhold and Leasehold Reform Bill: What do developers need to know?

The UK Government has published the Draft Commonhold and Leasehold Reform Bill, a major overhaul of leasehold law targeted at residential properties in England and Wales. The reforms are designed to modernise property tenure and offer a clear path away from traditional leasehold arrangements towards a more “owner-friendly” commonhold model. Below, we outline the headlines from the Bill.

What is a commonhold?

Commonhold already exists in law, however it is rarely used. The draft reform seeks to understand why this was and how it can be fixed. Briefly, commonhold is a form of freehold ownership designed specifically for multi-unit buildings, such as a block of flats. Each flat is a freehold unit, while the shared parts e.g. stairs, roofs, external areas are owned and managed by a Commonhold Association. All flat owners within the block will be members of that association, with voting rights and an obligations towards shared costs.

Cap on ground rents

What’s changing:
Ground rents on existing leasehold properties will be capped at £250 per year, and after 40 years the rent will reduce to a peppercorn (effectively zero).

What does this mean?

For developers: This reduces the future income stream from ground rent assets – a traditional value component for freeholders. Financial models for developments with significant ground-rent revenue will need revising, especially where ground rents were factored into valuations or long-term returns.
For the market: Buyers may find flats more attractive as ongoing costs become predictable and limited, potentially speeding up sales and reducing friction in mortgage approvals.

Ban on new leasehold flats

What’s changing:
Leasehold will be banned (no start date announced as of today) for most new flats intended for sale, with commonhold becoming the default tenure.

What does this mean?

For developers: You will no longer be able to sell a new build flat as leasehold in most circumstances. Developments that previously relied on leasehold structures will need to register as commonhold to sell units – depending on when this announcement comes into effect. This has implications for legal structuring, sales contracts, and potentially how service charges and responsibilities are documented.
Practical impacts: Commonhold requires upfront clarity on shared-area ownership and governance arrangements (a Commonhold Association), which may change how developers design management structures and engage with purchasers pre-completion.

Commonhold reform and easier conversion

What’s changing:
The Bill refreshes the commonhold framework and makes it easier for existing leaseholders to convert buildings to commonhold (reducing consent thresholds and clarifying governance).

What does this mean?

For developers: Commonhold will become a mainstream tenure that you must be familiar with. Early engagement with purchasers on management and governance arrangements will be critical. Commonhold’s success may hinge on robust, developer-friendly templates and advice to purchasers.
For buildings under construction: If leaseholders decide to convert soon after practical completion, developers may need to support handovers differently, including documentation for the Commonhold Association.

Abolition of forfeiture and new enforcement regime

What’s changing:
The Bill abolishes forfeiture (the ability to seize a home for non-payment of small sums like ground rent or service charges) and introduces a new, fairer enforcement scheme.

What does this mean?

For developers & landlords: The risk profile of residential management changes. Without forfeiture as a backstop, developers and freeholders will need alternative contractual protections for enforcement of obligations (e.g. service charge compliance).
For purchasers: Buyers may have greater security, potentially enhancing buyer confidence but requiring clear communication on rights and responsibilities around unpaid charges.

Additional leaseholder protections

What’s changing:
The draft Bill also tackles harsh enforcement powers related to estate rent charges and promotes greater transparency in service charges and management practices.

What does this mean?

For developers: Contracts will need to align with the new transparency and fairness standards. Service charge mechanisms, managing-agent roles, and information disclosures to purchasers will need legal and operational updates.
For the market: Increased clarity and fairness may reduce disputes after completion, but it places a premium on clear, compliant documentation at sale.

Quick take for developers

Traditional ground-rent income can no longer be relied on, meaning development appraisals and valuations will need to be revisited.

Standard leasehold contracts and precedents may also require comprehensive rewrites as commonhold becomes the default structure for new flats.

From a sales perspective, commonhold will need to be clearly and confidently explained to buyers, with a strong narrative around ownership, rights and ongoing obligations.

How can Price Bailey help?

At Price Bailey, our Tax team and VAT specialists are on hand to assist developers in navigating the changes proposed by the Bill, to ensure you are not left with unwanted tax charges. Fill out the form below to find out more.

Finally, commonhold associations will require early and careful planning, with developers putting robust governance and management frameworks in place to support buildings through completion and into long-term occupation.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.