BLOGS

A historic shift in property ownership

The government's announcement of the Draft Commonhold and Leasehold Reform Bill in January 2026 has set in motion what many consider the most fundamental change to residential property ownership in England and Wales in centuries. Housing Secretary Steve Reed described it as rebalancing "an outdated and unfair system" that has long complicated the dream of homeownership for millions.

REalyse data confirms the scale of this undertaking: there are currently 5.76 million leasehold titles registered in England alone, representing over 21% of all property titles. The government estimates that more than five million leaseholders will be directly affected by the reforms, with the changes expected to unlock stalled property sales that have been hampered by onerous ground rent terms.

What the reforms deliver

The Bill introduces several landmark changes that will reshape how flats are owned and managed across England and Wales.

Ground rent cap and phase-out

From 2028, ground rents on existing leasehold properties will be capped at £250 per year. After a 40-year transition period, ground rents will convert to a peppercorn (effectively zero). This addresses one of the most contentious aspects of leasehold ownership, where escalating ground rents have made some properties virtually unsellable.

Ban on new leasehold flats

Once the reformed commonhold framework is operational, developers will no longer be able to sell new flats as leasehold. Instead, new residential flats will generally be sold as commonhold, a form of ownership where residents collectively own and manage the building. This represents a fundamental shift from the current model where third-party freeholders retain control.

Abolition of forfeiture

The Bill removes the threat of forfeiture, where leaseholders could lose their homes over small breaches such as unpaid ground rent or service charges. A new, fairer enforcement regime will replace this draconian measure.

Easier conversion to commonhold

Existing leaseholders will gain a clearer pathway to convert their buildings to commonhold, with the consent threshold reduced from the current requirement for unanimous agreement. The consultation, open until 24 April 2026, is seeking views on the optimal threshold and process.

Regional market implications

The impact of these reforms will vary significantly across England's property markets. REalyse analysis of flat transactions over the past 12 months reveals the geographical concentration of the leasehold market.

London dominates the flat market with nearly 49,500 transactions in the past year at an average price of £491,000. The capital's dense apartment stock means London leaseholders stand to benefit most from ground rent caps and conversion rights. The South East follows with over 32,000 flat transactions at an average of £233,000.

Northern regions, where flat prices average between £115,000 and £165,000, may see different dynamics. Lower property values mean the economics of conversion to commonhold, and the associated legal and administrative costs, will require careful consideration. However, these markets could also see improved liquidity as ground rent concerns that previously deterred buyers are eliminated.

Mixed-use developments present particular complexity. The consultation specifically addresses how commonhold will work in buildings combining residential and commercial elements, proposing the introduction of "sections" to allow for delegated decision-making and new ways to apportion costs.

What this means for current leaseholders

For the 3.28 million leasehold flat owners in England's private sector, the reforms offer both opportunities and responsibilities.

Immediate benefits

The ground rent cap provides certainty. Once implemented, no leaseholder will pay more than £250 annually, regardless of what their lease currently stipulates. This alone could add value to properties previously discounted due to escalating ground rent clauses.

The removal of the two-year ownership requirement for lease extensions, already in effect since February 2025, allows new purchasers to immediately begin the extension process, improving market fluidity.

Conversion considerations

Converting to commonhold will require collective action. While the government intends to reduce the consent threshold below 100%, achieving majority agreement among leaseholders in a building remains essential. This will likely prove more straightforward in smaller developments than in large blocks with hundreds of units.

Commonhold also shifts management responsibility to residents. Property professionals anticipate increased demand for managing agents who can support commonhold associations, particularly during the transition period as residents adapt to their new responsibilities.

Implications for investors and developers

For buy-to-let investors and residential developers, the reforms necessitate strategic recalibration.

Developers will need to structure new flat developments as commonhold from the outset, requiring familiarity with a tenure model that has seen minimal use in England since its introduction in 2002. The industry will need to develop new documentation, sales processes, and buyer education materials.

Investors in existing leasehold stock may see improved exit valuations as ground rent concerns diminish. However, the loss of ground rent income streams will affect those who have invested in freehold reversions, potentially leading to legal challenges around the retrospective nature of certain provisions.

REalyse data shows that yield calculations for flats will need adjustment as ground rent outgoings reduce, potentially making some previously marginal investments more attractive.

Looking ahead

The consultation period running until April 2026 will shape the final legislation. Key outstanding questions include the precise consent thresholds for conversion, exemptions for certain property types, and transitional arrangements for developments already in planning.

The government has stated its intention to "abolish leasehold within this parliament", signalling urgency in implementation. However, legal experts caution that the complexity of unwinding a tenure system embedded in millions of existing contracts means the practical transition will extend well beyond the current parliamentary term.

For leaseholders, property professionals, and investors alike, the message is clear: engage with the consultation, understand the implications for your specific circumstances, and prepare for a fundamentally different landscape in residential property ownership. The feudal leasehold system that has governed English property law for nearly a millennium is finally drawing to a close.