The Commonhold and Leasehold Reform Bill: Scope for change?

The cap on ground rents 

The headline-grabbing change in the Bill is the capping of ground rent at a maximum of £250, changing to a peppercorn after 40 years - so effectively abolition. In essence this means that, once passed into law, nearly 1 million leaseholders will see their ground rent reduced and nearly 5 million will know their ground rent will never go above £250.

The policy objective to deal with unfair or unjust grounds rents is to be welcomed, but the Bill focuses on what it terms ‘unaffordable’ ground rents. However, the implementation of the £250 cap, which derives from a preference for a limit at 0.1% of the ‘average’ flat value - stated to be a national figure of £250,000  - is a level of expenditure that is, arguably, modest for a private property owner.  

There is also a degree of discussion around the overall tolerance for this amount and the extent to which this represents a shift in value – clearly as the government’s own policy documents sets out there will be a significant transfer of value from freeholders to leaseholders. A laudable policy objective in itself, albeit that it has to be borne in mind that a good number of the beneficiaries will in fact be private investors who own these properties. 

Last year, we saw an application for Judicial Review against the Leasehold and Freehold Reform Act (LAFRA), by a number of freeholders on Human Rights grounds, citing the proposals to abolish marriage value, make the enfranchisement process cheaper by reforming the law on valuation and costs recovery.   It is reasonable to assume that there will likely be further challenges to the cap on ground rents within the CLRB and we will have to see how the suggested cap and 40 year sunset clause fairs in the face of such litigation which is by its very nature, likely to be quite drawn out. 

The question on everyone’s lips is therefore, assuming that the CLRB is passed in its current format, what the nature of any legal challenge will be and the extent to which this will result in major delays to the implementation of the Bill, putting these proposed reforms in the same bracket as the LAFRA legislation. Undoubtedly this will not please leaseholders or those pressuring for reform. Professionals will also struggle to give certain advice until the overall pathway is clear. 

Missing elements?

One key element missing from CLRB, but which was included in LAFRA, is the potential for an exemption on the ground rents cap where lease transactions have been negotiated on a voluntary basis, and where a lower premium has been paid in exchange for a higher ground rent. This type of situation is not uncommon, and there should be scope in the Bill to permit the collection of ground rent over the cap, where these situations arise. 

Enfranchised blocks 

There are situations where leaseholders have enfranchised their block, and by doing so have purchased shares in reversions where there are higher ground rents paid by non-participants.

Funds have been deployed by them to buy out these interests. The proposed cap will prevent these people from recovering funds that they would have otherwise paid in relation to the acquisition of their freehold, and consideration needs to be given as to whether there should be an exemption for such cases.

The CLRB and general government policy demonstrates a clear intention to transition away from leasehold as a form of land tenure for residential property, and the Bill seeks to continue this legislative journey towards commonhold.

How should these reforms be implemented? 

The move from leasehold tenure to commonhold should be fairly simple when applied to new builds and the tenure starts ‘from scratch’. However, it is potentially much more complex when it comes to existing leaseholds trying to convert into commonhold.

The CLRB does not contain a specific conversion mechanism to move from leasehold to commonhold.  Instead, it uses the existing collective enfranchisement model as the device to allow this to happen.

A potential drawback to this approach, is that there is potential for collectives to ‘rest’ once they have purchased their freeholds, rather than taking the additional step and moving on to commonhold – thus diminishing the government’s stated aim to move to commonhold. There is currently debate around how the conversion mechanism and the post completion right to participate will be valued and as I mentioned in my submissions to the Housing Communities and Local Government Select Committee, these have to be worked through properly if we are not to end up in a situation where post implementation there is inequality between participants who have paid full value and those joining in later. 

To begin to understand how these will work and to properly understand the impact of the legislation we also need the government to ‘come clean’ with its proposals to reform LAFRA and the valuation mechanism, as the CLRB will rely on this for these rights.    

And what as to timing? 

While the draft Commonhold and Leasehold Reform Bill could be on the statute books within 18 months, full implementation requires LAFRA to be ready, and serious doubt remains around how long that will take. There is also the consideration that different aspects of the Bill are likely to need different implementation dates, so a staggered approach will be necessary, further delaying full implementation.

With regards to a ban on new leasehold flats, it might be reasonable to assume that the implementation and commencement of commonhold (for new developments) will take between three to four years. This assumes there are no delays to LAFRA implementation and no legal challenges to the CLRB (which is unlikely). Therefore, an outright ban on the sale of new leasehold flats will not be possible in my view for a much longer period of time, perhaps at least seven to ten years. 

Time to get ready

A further element to bear in mind is that for a smooth implementation, the entire property industry must be ready - developers, insurers, and the wider conveyancing market. It will take some considerable time to get to this position.

Delays to date regarding LAFRA have already created market uncertainty and damaged leaseholder and investor confidence. 

To avoid further unintended consequences, it would be prudent at this stage for the government to issue a clear statement about its intentions regarding the ground rent ban. This statement should clearly set out the reasons for the ban’s likely compatibility with the Human Rights Act 1988 so that those affected can have a little more clarity when assessing the potential implementation timescales.  

It is also essential that the government engages all relevant stakeholders at this stage to assess or avoid potential litigation and help ensure that the implementation of the Bill does not become protracted and lengthy, further fuelling leaseholders’ ire and the loss of confidence in the whole process.

There is no doubt that for everyone involved in leasehold or affected by it, this new draft Bill is historic. However, its publication is just the first chapter in the story, and bit like a draft of a novel, we may well expect a few new chapters to be added before it is published. As to whether it will be a ‘best seller,’ that remains to be seen! 
Mark Chick is Senior Partner at Bishop & Sewell and joint head of the Landlord & Tenant team.  He is a director of ALEP, the Association of Leasehold Enfranchisement Practitioners. 

The above is accurate as at 12 March 2026.  The information above may be subject to change. The content of this note should not be considered legal advice and each matter should be considered on a case-by-case basis