Draft Commonhold and Leasehold Reform Bill

The government has recently published its long-awaited proposed reforms to leaseholds. The Bill aims to improve fairness for homeowners in flats, cap ground rents and help these owners avoid unregulated service charges from third-party management companies.

As potentially some of the most significant changes to homeownership law in decades, what is Commonhold and what do we know so far about the Bill?

What is Commonhold?

Commonhold is a form of freehold property ownership designed for flats and apartments, where there are a number of individual homeowners within a building, or larger development.

Homeowners own their individual property outright, while jointly owning and managing shared areas, such as roof, communal areas and garden spaces.

Commonhold is proposed as a permanent alternative to leasehold, with no lease that expires and no external landlord or freeholder.

What does the Bill propose?

It is intended to make commonhold workable in practice and support a shift away from leasehold. It includes proposals to:

• Make commonhold the default tenure for new flats, with leasehold only allowed in limited exceptions, for example shared ownership properties.
• Improve conditions for existing leaseholders, including the £250 ground rent cap and reduction to peppercorn (effectively zero) after 40 years.
• Provide greater service charge transparency over how charges are calculated and spent.
• Update the commonhold framework for modern and mixed-use developments, and make conversion from leasehold simpler.

What are the benefits of Commonhold?

1) Permanent Ownership: Unlike leasehold, commonhold ownership does not expire, eliminating the need for costly lease extensions.

2) No Ground Rent or Third-Party Landlord: Usually there would be no landlord, which removes the risk of unreasonable charges, forfeiture, or restrictive covenants.

3) Management: Owners are members of a Commonhold Association that manages the building, allowing them to directly control maintenance, repairs and service charges.

4) No Forfeiture: The risk of losing the property due to lease breaches is reduced.

What are the Timescales?

This is currently a draft bill which will now undergo pre-legislative scrutiny before being formally introduced to Parliament. Finalisation is expected late 2028 or before the end of the current parliamentary term in 2029.