From recommendations to reality – Leasehold Reform report published

Yesterday, the Housing, Communities and Local Government Committee published its Report on the draft Commonhold and Leasehold Reform Bill.

The key take-aways from the Report are that whilst the government’s proposals represent a significant step toward giving leaseholders greater control over their homes, the draft legislation still falls short of the government’s own promises and the expectations of millions of leaseholders. The government has pledged repeatedly to “bring the feudal leasehold system to an end,” and the Committee seem resolute that this goal will be missed unless substantial amendments are made before the Bill is introduced to Parliament.

Here we look at a few of the key elements of the Bill that were the subject of pre-legislative scrutiny.

Ground rents

One of the central issues examined is the government’s plan to cap ground rents on existing leases at £250 per year, with a transition to a peppercorn rent over forty years. While the Committee welcomes the cap itself, it finds no convincing justification for such a long transitional period. Based on the evidence presented, a twenty‑year transition would appear to strike an equally fair balance between leaseholders and freeholders. The Committee therefore calls on the government to publish the evidence underpinning its choice of a forty‑year period and suggests that the £250 cap could be implemented a year earlier than planned, by late 2027.

The Committee seems to suggest that ground rents in principle are not justified because they are not paid in consideration of any service rendered, although that has never been the case; commentators have suggested that a rental income would incentivise a landlord to ensure that good estate management is practised, but ultimately a ground rent portfolio has been an established investment option for a considerable time, as evidenced by the sheer volume of pension funds whose investments largely contain this asset class.

The widely discussed pension crisis will likely only be exacerbated by this transfer of value. The proposal to bring forward the effect of this sunset clause is likely to intensify that debate and focus minds further in respect of any further legal challenges that may be brought, whether in terms of judicial review or on the basis of human rights.

The numerous accounts flagging the status of the leaseholder-turned-freeholder group have been overlooked again and the repercussions of the proposed ground rent cap go even further.  In enfranchised blocks, leaseholders who participate in a freehold purchase will pay the non-participating leaseholders’ share of the cost of enfranchising, including any capitalised ground rent.  This is on the basis that they will be recompensed if and when the non-participating leaseholders decided to take a share of the freehold. The cap is therefore likely to cause huge inequity between leaseholders of the same block and do little to serve the objective of harmonious co-occupation.

Commonhold as the default tenure

A major part of the draft Bill is the creation of a modernised commonhold system intended to replace leasehold as the default tenure for flats. The Committee supports this goal and welcomes the new legal framework but warns that several key recommendations from the Law Commission – recommendations the government had promised to implement – are missing. Without these measures, converting to commonhold may remain too difficult or expensive for many leaseholders, undermining the government’s ambition to make commonhold the norm.

The Committee recommends that conversion to commonhold should automatically follow collective enfranchisement, which would simplify the process and better align with the government’s stated policy. This is a bold departure from the government’s proposals and one which is likely to have substantial repercussions on the take-up of collective enfranchisement. Commentators understood that commonhold would be mandated to new-build developments in the first instance, before it is eventually rolled out. The basis of this is two-fold – to flush out potential issues in implementation and to avoid widespread multi-tenure buildings and the plethora of estate management challenges that this would create. Again, the concern here is that whilst this is in principle advantageous, the practicalities and challenges may not have been fully understood.

Ban on new leasehold flats, forfeiture and repeal of rentcharge powers

The Committee recognises the government’s commitment to banning new leasehold flats and making commonhold the default tenure, but stresses that this transition must be carefully managed to avoid disruption for developers, housing associations, mortgage lenders, and the retirement housing sector.

It also supports the abolition of forfeiture and the repeal of harsh rentcharge powers on private estates, both of which have long been criticised as unjust.

Regulation of managing agents

Another central issue of the Report is the regulation of managing agents; while the Report acknowledges that the priority is the promotion or indeed imposition of commonhold, the Committee suggests that it would be wholly achievable to include these provisions in this legislation.

The Committee is particularly concerned about the method by which managing agents ought to be regulated; in particular they are vehement that this should be done by a public body and not by any professional bodies. The Committee argues that regulation of managing agents is essential and that the final Bill must establish an independent regulator with real enforcement powers, including the ability to remove licences from agents who fail to meet required standards. This is seen as vital not only for leaseholders who remain in the leasehold system but also for those who will rely on managing agents after converting to commonhold. It is widely accepted that bad actors in this area can have devastating effects on the lives of leaseholders who feel powerless in the face of poor service, high charges, and a lack of accountability. Regulation of managing agents is widely welcomed throughout the industry.

Proposed timeline

The Report sets out the following:

• The Government must provide its initial response to each of the Committee recommendations set out in the Report within 2 months;
• Introduce the final Bill to Parliament by Autumn 2026;
• Schedule the Second Reading before November 2026 recess;
• Aim for Royal Assent by mid-2027 so that some of the provisions such as the ground rent cap in force can come into force in late 2027.

Conclusion

Overall, the Committee concludes that while the draft Bill contains many positive reforms, it does not yet deliver the comprehensive change that leaseholders have been promised. The Committee are clear in their message: in order to meet public expectations and honour its manifesto commitments, the government must strengthen the Bill before its introduction in Autumn 2026. If it does so, the Committee believes the legislation will command broad cross‑party support and could finally address the longstanding inequities of the leasehold system.

It seems clear that the Bill is unlikely to do away with leasehold tenure overnight, but real change and real improvement is achievable.

How we can help

If you would learn more about the proposed reforms, you can view our webinar series here The journey to Commonhold and should you have any questions about the new legislation or need assistance with leasehold matters, contact our expert leasehold enfranchisement team to discuss how we can support you.