Commonhold and Leasehold Reform Bill - The next round of leasehold reform

On 27 January 2026 the Ministry of Housing, Communities and Local Government published the long-awaited draft Commonhold and Leasehold Reform Bill, as part of the Government's ongoing package of leasehold reform. 

The draft bill touches on a number of areas of residential leasehold tenure, including the following:

• The long-promised attempt to "reinvigorate" commonhold, but this time with some teeth. Unlike in the Commonhold and Leasehold Reform Act 2002, where a block could collectively and voluntarily convert to commonhold if they wished (and almost no one did), the bill makes it mandatory for new blocks to be developed and sold on a commonhold basis (with strictly limited exemptions).
• The process to convert to commonhold has also been amended, requiring only 50% of qualifying leaseholders to elect to proceed, rather than unanimity.
• The grant of new leasehold flats will be banned, other than for certain defined exemptions. A consultation has opened today which asks stakeholders to comment on the scope, exemptions, method, timing and costs and benefits of the ban of the grant of leasehold flats.
• Most eye-catching and headline-grabbing is the proposed cap of £250 per annum on ground rents in existing leases, for a transitional period of 40 years. After that 40-year period is up, ground rents will revert to a peppercorn, no matter what the terms of the lease say. 

Is the ground rent cap open to challenge?

In July of 2025 the High Court heard 6 claims for judicial review of various parts of the Leasehold and Freehold Reform Act 2024 (LFRA 2024), on the basis that the Act infringed on the A1P1 rights of landlords. Those claims were unsuccessful in the High Court, however 5 of the 6 claimants have applied for permission to appeal to the Court of Appeal.

One of the challenged measures under LFRA 2024 was that enfranchisement premiums should apply a 0.1% cap on ground rents when calculating the term value. 

The bill seeks to impose an actual cap, not just a hypothetical one for the purposes of premium calculation, and at a fixed level of £250 rather than a percentage of the property value. 

Landlords and ground rent investors will no doubt be considering the wording of the bill carefully to understand if this may infringe their A1P1 rights, in that it varies existing leasehold contracts at cost to the landlord without any sort of compensation proposed. The cap will have the most impact in prime central London where significant ground rents are not uncommon. 

Leaseholders who have already enfranchised their blocks may lose out, as there is no exemption for these types of landlords. A share of freehold company may have paid significant sums in respect of non-participating flats when they purchased their freehold, paying full market value for the ground-rents reserved under those non-participating leases. If that future income is capped at £250 per annum, those leaseholders who have already enfranchised may make a significant financial loss.

What are the next steps for the bill?

The press release that accompanied the bill suggests the ground rent cap could come into force "in late 2028". Other than that, the bill will now pass into pre-legislative scrutiny. Leaseholders and freeholders alike will be watching its passage through Parliament carefully.