Draft Commonhold and Leasehold Reform Bill: proposed changes
On 27th January, the Government published a draft Commonhold and Leasehold Reform Bill, which proposes to reform the leasehold system.
If approved by Parliament, the Bill will provide greater security to leasehold homeowners in England and Wales.
In this blog, our residential conveyancing solicitors explain more about the proposed changes for leasehold properties.
Leasehold to be replaced by Commonhold
The most significant change within the Commonhold and Leasehold Reform Bill is the idea to ban leasehold tenure for new flats in England and Wales and replace it with commonhold.
Commonhold is a form of ownership where residents own and manage their building (i.e. the block of flats) between themselves and in the absence of a third-party landlord.
Replacing leasehold with commonhold would ensure full freehold ownership for each homeowner, allowing residents more control over their properties.
This proposal is currently under Government consultation until 24th April 2026, and you can respond to the consultation here.
Ground rent capped at £250 a year
Ground rent charges vary by area, and there is currently no maximum amount that leaseholders can be charged, although the Ministry of Housing, Communities and Local Government estimates that around 770,000 to 900,000 leaseholders pay over £250 per year.
Currently, ground rent can increase significantly depending on the terms set out in the lease. As part of the proposed Commonhold and Leasehold Reform Bill, a cap of £250 a year will be applied to ground rents on existing leases, changing to a peppercorn rent after 40 years. This will help leaseholders save money and avoid issues with buying, selling and mortgaging properties with high ground rents.
Ground rent has already been banned for most new long residential leases (a lease with a term of more than 21 years) since June 2022, but if successful, the cap on ground rent will apply to existing long residential leases from late 2028.
What is ground rent?
Ground rent is an annual fee paid by a leaseholder (the person living in the leasehold property) to the freeholder (the landlord or owner of the building) under the terms of their lease which pays for the right to occupy the land in which the property is built and does not contribute to any building maintenance like a service charge.
What is peppercorn rent?
Peppercorn rent is a nominal sum paid by a leaseholder to the freeholder to ensure the lease is legally valid, without actually paying anything for ground rent.
Forfeiture to be scrapped
Under current law, freeholders can take action to seize a leaseholder’s property if their service charge debt is over £350. The Government has proposed scrapping this and replacing it with a new court-led enforcement, making it ‘fairer between landlord and leaseholder.’
Contact our leasehold conveyancing solicitors
Leasehold property purchases can be more complex than purchasing a freehold due to liabilities for ground rents and service charges. If you are buying or selling a leasehold, it is important to instruct a conveyancing solicitor who specialises in this area.
Contact our leasehold conveyancing solicitors on 0117 325 2929 or use our online conveyancing calculator for an instant quote.
