Leasehold Reform: What the Committee's scrutiny of the Draft Bill means for property owners and investors

In May 2026, the Housing, Communities and Local Government Committee published its report on the draft Commonhold and Leasehold Reform Bill. The bill, which the government published in January 2026, promises sweeping changes to the way flats and houses are owned across England and Wales. It affects around five million leasehold homes and has significant implications for homeowners, landlords, investors and property managers alike. This article explains the key findings from the Committee's scrutiny and what they could mean in practice.

What is the bill trying to do?

At its core, the bill is designed to phase out the traditional leasehold system and replace it with "commonhold," a model of ownership where flat owners collectively own and manage their building without a third-party landlord. The bill also introduces a cap on ground rents for existing leases, bans the creation of new leasehold flats and abolishes "forfeiture," the controversial power that allows landlords to reclaim a property for relatively minor debts.

The government has described this as bringing "the feudal leasehold system to an end." In reality, the transition will take many years, and the Committee has identified several areas where the bill needs strengthening before it reaches Parliament in its final form.

Ground rents: a cap of £250, but for how long?

One of the most impactful provisions is a cap on existing ground rents at £250 per year, eventually falling to zero (a "peppercorn") after a transitional period. Ground rent is an annual charge that leaseholders pay to their landlord, often for no identifiable service in return. Many modern leases include escalating ground rents that double every 10 or 15 years, making homes difficult to sell or remortgage.

The government has proposed a 40-year transitional period before ground rents fall to zero. The Committee questioned this, suggesting that a 20-year period could also be fair, and called on the government to publish further evidence justifying the longer timeline. The Committee also recommended that the cap should come into force in late 2027, a year earlier than the government's current target.

For landlords, freeholders and investors in ground rent funds, this represents a material reduction in income. The estimated transfer of value from freeholders to leaseholders under a 40-year transition is between £10 billion and £12.7 billion. The risk of legal challenge under human rights law is real, though the government has already successfully defended a similar challenge in the High Court.

Commonhold: the future of flat ownership?

The bill creates a modernised legal framework for commonhold, reducing the threshold for converting a leasehold block from unanimous consent to just 50% of qualifying leaseholders. The Committee went further, recommending that conversion to commonhold should be the automatic outcome when leaseholders collectively buy their freehold, unless a majority votes to opt out.

Currently, only 18 commonhold developments exist in the whole of England and Wales. While the government wants commonhold to become the norm, the ban on new leasehold flats is "highly unlikely" to take effect before the next general election, meaning the full transition is still some years away.

Managing agents: regulation is coming

The bill does not include provisions for regulating property managing agents, which the Committee called a "significant shortcoming." It recommended the creation of an independent regulator with powers to fine or remove the licences of agents who fall below acceptable standards. For property owners and investors, this signals an important direction of travel for the sector.

What should you be doing now?

The bill is expected to be introduced to Parliament in autumn 2026, with the government aiming for Royal Assent by mid-2027. While the final shape of the legislation remains uncertain, the direction is clear.

Key takeaways:

• Existing ground rents will be capped at £250 per year, falling to zero over time. The transitional period remains under debate.
• Commonhold will gradually replace leasehold as the default tenure for flats, though the timeline for the ban on new leasehold flats is uncertain.
• Legal challenges to the ground rent cap are expected but the government has successfully defended similar claims to date.
• An independent regulator for managing agents is likely, even if not included in the initial bill.
• Investors in ground rent income streams should review their exposure and factor the proposed reforms into valuations and business planning.

If you own, manage or invest in leasehold property, these reforms will affect you.

Whether you are a leaseholder looking to understand your rights, a freeholder assessing the impact on your portfolio, or a developer planning new schemes, now is the time to take stock. Our Real Estate team is here to help you navigate the changes ahead. Please get in touch if you would like to discuss how these proposals may affect your interests.

For more information or advice, please contact Stacey Nixon in our Commercial Property team.