Commonhold reform: what the draft Bill tells us

The Government’s Commonhold and Leasehold Reform Bill has now been published in draft, following the Commonhold White Paper which was released in March 2025. We reported on the white paper in May last year. Does the Bill provide any further information?

Below we set out the major provisions of the Bill and consider what they mean for developers, funders, landlords, and homeowners.

Ending new leasehold flats

One of the headline changes is a ban on the grant or assignment of certain long residential leases of flats, replacing them with commonhold. This is set to apply across:

• New residential developments, including mixed‑use schemes
• Conversions of houses into flats
• Build‑to‑rent blocks where units are later sold rather than retained for rental (shared ownership leases will still be permitted).

The government also announced a Moving to Commonhold consultation on this point which ends on the 24 April.

Commonhold version two: a more flexible and lender‑friendly model?

The Bill, building on the White Paper proposals, aims to create a more practical and market‑ready form of commonhold.

The key features include:

Governance through a commonhold association

Every unit owner will become a member of a company limited by guarantee responsible for the management of the building. Decisions will generally be taken by simple majority. There will be safeguards for minority interests with some decisions requiring either 75% or 80% of the votes (depending on the decision) with court consent or 100% agreement. The company's articles will be registered with the Land Registry.

Use of “sections” for mixed‑use and complex developments

We touched on this in our previous article. The Bill provides for the use of “sections” within a commonhold therefore enabling sub‑groups of residents or commercial occupiers to make decisions relevant only to their part of the building or section. Additional information on practical implementation is to be provided in regulations, drafts of which are awaited.

Directors obligations

Clear processes for appointing directors are provided together with a list of their duties. There are also provisions on how the appointment and removal of directors can be achieved when the process fails. However, some details such as the minimum level of insurance and the number of directors required have yet to be provided.

Mandatory reserve funds

To avoid the well‑known issue of sudden, unplanned maintenance charges, all commonholds must operate at least one statutory reserve account. The Bill provides protections for these funds, but regulations will provide further details.

Commonhold community statement

This will be standardised with full details provided by regulations. As suggested in the white paper, local provisions will be permitted. 

Sales of commonhold unit

Sales of commonhold units will not be restricted but there will be a duty to notify the Commonhold Association of any sale or transfer. Details of the contents of the notice and any fees the Association may be entitled to charge are still awaited.

Granting mortgages and easements over a commonhold unit

Mortgages of the commonhold unit will be permitted but not a charge of part. This replicates what currently happens for long leaseholds except that the right here will be contained in legislation rather than by market practice in a lease.

To grant easements to a commonhold unit, approval from the Commonhold Association will be necessary, requiring a 75% majority vote among its members. Additionally, the Association must be a party in the grant documents. These procedures add extra bureaucracy for unit holders, particularly when making changes such as connecting their heating system to a heat network.

Non-payment of commonhold contributions

As we reported previously the Association can apply for a court order to sell a unit if the unit holder is in default. The Bill expands this to provide that, if the Commonhold Community Statement permits, via a local provision, a tenant of a leased unit can be nominated as responsible for the contributions in the place of the unit holder. Any order to sell could then apply to the leasehold for recovery of the outstanding monies rather than the unit. The rights to obtain any order for sale will only apply for a specified amount of arrears which is to be set by regulations. However, it will not be less than £500 nor more than £5,000. 

Lease rents capped

The cap is to be at £250 initially from the time the Bill becomes law and then reduced to a peppercorn 40 years from that date. This will not apply to business, community housing or home finance plan leases.

End of forfeiture

Currently leaseholders can lose their home, which includes their equity, on default of a debt as low as £350. The Bill introduces a Lease Enforcement Claim instead where landlords must satisfy strict statutory conditions to apply for a court-ordered remedy. The Court can issue a remedial order or, in an extreme case, an order for sale by a receiver. The proceeds from a forced sale will pay off the debt and costs with any remainder going to the leaseholder. This avoids the situation in forfeiture where the landlord receives the "windfall" of a repossessed flat.

Why is reform needed?

Across Government commentary, the rationale for change is clear. Leaseholders have long faced:

• Escalating ground rents
• High permission and administrative fees
• Onerous lease terms and
• Limited ability to influence building management.

The Bill seeks to correct this structural imbalance and reflect international models where freehold‑equivalent ownership of flats is the norm.

The road ahead

Government ambition remains for commonhold to become the default tenure for home ownership, but delivery will depend on:

• Developer confidence to build and sell commonhold.
• Consumer confidence to buy it. and
• Lender confidence to finance it.

We encourage stakeholders to engage with the Government consultation before 24 April.

At present, the Bill is with the Housing Communities and Local Government Select Committee for consideration and advice.

Following the consultations a substantive bill will then be prepared for submission to the Houses of Parliament.

What this means for you

• Developers should begin assessing pipeline schemes for suitability as commonhold and consider the implications for phasing and mixed‑use layouts
• Landlords and investors should consider the future value of leasehold portfolios and potential shifts in market appetite
• Leaseholders may gain enhanced rights and autonomy under the proposed regime
• Lenders will need clarity on security, enforcement rights, and valuation under the new structure.

We will continue to monitor the legislative process and provide further updates as the consultation progresses.

This article was also authored by Jolanda Peters, Legal Director at Womble Bond Dickinson.