A step towards fairness: abolishing forfeiture and reforming rentcharges under the draft Commonhold and Leasehold Reform Bill

The current system:

Under the current residential leasehold system, landlords can rely on forfeiture provisions within leases to terminate them when a leaseholder breaches their terms. Forfeiture allows landlords to recover possession of the property, meaning leaseholders may lose their homes and any equity they have built up. Although forfeiture is rarely pursued, its mere existence places significant pressure on leaseholders, as the threat of losing their home for often minor breaches is widely regarded as unfair and incompatible with modern expectations of home ownership.

The proposed changes:

The draft Bill proposes to abolish forfeiture, replacing it with a fairer, court-supervised lease enforcement scheme. Under the new framework, landlords would no longer have the unilateral power to end a lease through forfeiture. Instead, they would need to meet a series of statutory conditions designed to protect leaseholders before applying to the court for enforcement.

Courts would assess the case to determine the most proportionate and appropriate remedy. Potential outcomes could include:

• An order requiring the leaseholder to remedy the breach;
• In more exceptional cases, an order for sale of the property, with safeguards to ensure leaseholders are compensated for any remaining equity.

Certain breaches, such as ground rent arrears and other non-payment breaches below a specified threshold are excluded. For small debts or ground rent arrears, landlords will not be able to use forfeiture but can continue to rely on existing civil debt recovery processes, which are considered more appropriate.

While the proposed framework aims to create a fairer system, requiring landlords to apply to the court for enforcement may introduce additional costs and delays. This could discourage enforcement or result in breaches going unaddressed. Striking the right balance will be critical to ensure landlords retain confidence in the system while leaseholders are protected from disproportionate penalties.

Regulation of rentcharges:

A rentcharge is defined as an annual or other periodic sum charged on land. Estate rentcharges, commonly used on private managed estates, help enforce positive covenants to recover costs for maintaining shared amenities such as roads, drains, and sewers.

Under the current law, Sections 121 and 122 of the Law of Property Act 1925 gives rentcharge owners enforcement remedies enabling them to take possession of the property if a homeowner falls behind on payment, along with granting a lease of the property to trustees and appointing a receiver with mortgagee-like powers. This can mean that Mortgage lenders often require costly deeds of variation to remove these risks before agreeing to offer loans.

The proposed changes:

The draft Bill aims to repeal sections 121 and 122 of the Law of Property Act 1925 which would bring an end to these remedies. The rentcharge owner will be able to retain ability to recover arrears through more proportionate means such as:

• Cost recovery clauses;
• Action in small claims court; 
• And will require to give notice before they give enforcement action. 

These changes will benefit homeowners, as they will no longer be at risk of losing their rights over their property, and Mortgage lenders, as they will have greater confidence in lending on properties with estate rentcharges, ultimately removing the need of costly deeds of variations. 

Government consultations:

In December 2025, the government launched two consultations to enhance protections for homeowners on freehold estates and reduce reliance on privately managed estates. Building on the Leasehold and Freehold Reform Act 2024, proposals include:

• Clearer information about estate management charges;
• The right to challenge charges at the First-tier Tribunal; and
• Mandatory professional qualifications for managing agents. 

The Law Commission is also exploring ways to give residents greater control over estate management. These changes will impact estate management practices, making it essential for property practitioners to stay informed and adapt their advice accordingly.

Summary

The proposed reforms represent a fundamental shift towards fairness and proportionality in leasehold enforcement. By abolishing forfeiture and reforming rentcharges, the Bill aims to modernise the system, providing leaseholders with greater security while maintaining workable remedies for landlords.

As the Bill remains under review, its impact on the property sector will need to be closely monitored. Once implemented, these changes are likely to shape the future of leasehold enforcement and property ownership in England and Wales

---

For more information or advice please contact Beth Spence in our Residential Conveyancing team.