Updated 10 July 2026
Short Answer – Commonhold and Leasehold Reform Bill 2026 has run into a brick wall. The legislation is so onerous to landlords that there are Human Rights Act (ECHR) challenges to its legitimacy. The intention is to disenfranchise landlords of their reversionary (freehold) titles, cap or vitiate ground rents, and limit compensation through the abolition of ‘marriage value’ (50% of the increased value of the lease). It is expected that eventually the HRA challenge will fail, and the CLRA will be a law, rather than just an idea.
Critics point out that taking the freeholds and ground rents from the landlord and giving them to the tenants will not stop tenants (‘commonholders’) arguing with each other, disputing maintenance costs and management company service charges. Arguably, it’s an arbitrary socialist ideological change which does little to improve the position of the landlord or tenants. Other reforms within the act, like rentcharge regulation, lack efficacy and will only increase costs and delays.
Table of Contents
Power to the people, but at what cost?
The Draft Commonhold and Leasehold Reform Bill 2026…
….published on 27 January 2026 by the UK Government (Ministry of Housing, Communities and Local Government), represents a landmark step toward ending the “feudal” leasehold system in England and Wales.
Building on the Leasehold and Freehold Reform Act 2024, the draft legislation—LINK > available on GOV.UK—repeals and replaces Part 1 of the Commonhold and Leasehold Reform Act 2002, reinvigorates commonhold as the preferred tenure, bans most new leasehold flats, caps ground rents on existing leases, abolishes forfeiture, and introduces fairer enforcement.
A pre-legislative scrutiny process and consultation (running until April 2026) will shape final provisions, potentially effective from late 2028 onward.
Key reforms address longstanding leaseholder grievances, including escalating ground rents, disproportionate forfeiture threats, and limited control over buildings.
Keys points
The Bill aims to empower homeowners with perpetual ownership, collective decision-making, and cost savings—estimated at £10-12.7 billion lifetime for leaseholders via ground rent changes alone — while ignoring landlord interests through inadequate remedies.
- Ground rent limited to £250 pa, then nil after 40 years ?— Yes, the Bill caps ground rents on most existing long residential leases at £250 per year (with limited exceptions). From implementation (expected late 2028), rents exceeding this reduce immediately; after 40 years, they taper to a peppercorn (effectively zero). This overrides existing lease clauses, delivering major savings for the ~770,000-900,000 leaseholders currently paying over £250 annually. No retrospective refunds apply for past overpayments.
- Forfeiture barred; court-ordered repossession with trust/mitigation ?— Forfeiture is abolished for residential leases, ending the “draconian” remedy where landlords could seize properties over minor debts (e.g., any debt reserved as rent such as service charges). Replaced by a new, proportionate enforcement scheme: courts assess breaches and order remedies like payment, sales (with proceeds potentially held in trust), or other sanctions. Landlords must mitigate losses (similar to mortgage repossessions), selling properties fairly and overreaching tenant equity only as needed. This protects homeowners while enabling landlords to recover dues.
- Compensation for landlords losing rent, forfeiture, or freehold value ?— No, the draft Bill provides no direct compensation for lost ground rent income, forfeiture rights, or freehold value erosion. Government policy statements justify this as proportionate reform in the public interest, addressing exploitation and aligning with modern ownership expectations. Potential ECHR/HRA (Article 1 Protocol 1) challenges exist—freeholders argue interference with possessions without compensation—but precedents (e.g., recent High Court dismissals of similar claims under the 2024 Act) suggest robust justification may prevail, emphasizing leaseholder protections and societal benefits. No mandatory payouts are proposed. *See footnote 31/01/26
- How commonhold works ?— Commonhold registers freehold land at HM Land Registry (HMLR) as “commonhold land” with title absolute, marked by commonhold notices/restrictions. The freehold vests in a commonhold association (a company limited by guarantee), governed by Articles of Association, a Commonhold Community Statement (CCS—defining units, rights, obligations, voting, funds), and possible sections for mixed-use. Unit-holders own their unit outright plus shared rights in common parts. Directors manage duties; tribunals resolve disputes. Reforms ease setup, allow sections, mandate reserve funds, simplify voting/amendments, and enable conversions with lower thresholds (e.g., 50% consent vs. current unanimity).
- Need for lease after converting to commonhold ?— On conversion, the existing lease merges into commonhold unit ownership—the lease extinguishes, transferring freehold-equivalent rights to the unit-holder. However, extant lease rights/obligations (e.g., certain covenants, home finance plans) may attach or inform the CCS/rules during transition. Transitional provisions preserve key elements pending full effect, ensuring continuity for lenders, shared ownership, etc. Dont throw you lease away – you’re still going to need it.
- Leasing out commonhold units — Yes, commonhold units can be leased, but restrictions apply. Residential leases are generally prohibited (aligning with bans on long residential leases), except permitted categories (e.g., pre-registration home finance/shared ownership leases). Non-domestic/commercial units or parts allow leasing freely for business use. Leasing supports equity release, Sharia-compliant mortgages (e.g., diminishing musharaka), and shared ownership schemes. The CCS cannot ban non-residential leases outright, enabling flexibility in mixed-use developments.
These reforms promise greater security, transparency, and affordability at the landlord’s expense. Critically these changes do not substantially address many of the major issues with modern leases or estate rent charges – e.g. inflated service charge for highly questionable charges and admin fees, putting flammable cladding on buildings and then ticking the Fire Safety Risk Assessment as adequate, costs of fire safety remediation remain muddled arbitrary and unfair.
The act itself is arguably simple retribution against powerful organisations, builders, investors, professional landlords and pension companies for misusing the leasehold system – in a country with limited housing supply and spiralling home ownership costs – caused by the cheap debt regime post the 2009 financial crisis.
Leaseholders gain control via collective management, reserve funds, and easier conversions; developers must adopt commonhold for new flats (with exemptions consulted). Landlords face income reductions and reduced enforcement tools.
Conclusion
Scrutiny by the Housing Committee and stakeholder input will refine implementation, potentially transforming millions of properties. Overall, the 2026 Draft Bill signals the phased demise of residential leasehold tenure, prioritizing homeowner rights while modernizing tenure.
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Previous article about Human Rights Act claims against the CLRA 2026
David Buchanan is a property litigator, conveyancer and private client lawyer with 20 years experience (or more!) in the field. He is currently a consultant solicitor for Taylor Rose.
*Footnote
Under the draft CLRA 2026 Bill – The tenant will no longer have to pay marriage value to compensate the landlord. Link to an example calculation here Whilst, in theory, the value of the freehold can be calculated and that value must paid by the tenant to the landlord to acquire the freehold, the value is going to be much reduced, potentially nil if the value reflects defects in the title.
E.g. A terraced house in Lancashire with a value of £150,000, lease of whole, rent £1.5- per annum; the freehold value to the tenant would be agreed at around £1500 plus legal costs
The value will be based on the capped ground rents, lost rights of forfeiture, other issues with the freehold e.g. fire safety remediation costs even. There is no compensation for the landlord for the government taking away his rents and rights in the statutes. The actual formula is not yet available, but the value the freeholder can expect to receive is very low, possibly nominal.
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