From leasehold to commonhold: what does it mean for residential and commercial properties?
Landmark legislation has been put forward to transform the leasehold system in England and Wales. Although the changes are expected to mainly impact residential flats, there could be repercussions for mixed-use buildings too. In this blog, the Residential and Commercial Property teams at Attwaters explore what the Draft Commonhold and Leasehold Reform Bill (the Bill) could mean for you.
What has prompted the reform?
The current residential leasehold system dates back to medieval times and has been described as ‘feudal’ by the government. Commonhold was first introduced as a potential alternative to the leasehold model in 2002 by a previous Act of Parliament, but take-up has been slow.
According to one government report, fewer than 20 commonholds have been established covering around 200 units. By comparison, there are around five million leasehold properties in England and Wales. Under the Bill, all new-build flats would be sold as commonhold.
How does commonhold work?
Unlike the leasehold model, commonhold enables an individual to own a residential or commercial unit within a shared building on a freehold basis without an expiring lease. In addition to their property, a commonholder jointly owns communal areas of the building, such as hallways and outdoor spaces. Commonhold properties are normally managed by a commonhold association, which should give owners more control of communal areas and service charges.
What does this mean for existing leaseholders?
A new process would be established to make it easier for existing leaseholders to voluntarily convert to commonhold tenures. In the past, 100% of leaseholders in a building needed to agree. As part of the shake-up, this would reduce to 50%.
The government has ruled out mandatory conversion for existing leases due to the complexity and the potential for landlord compensation claims.
How would commonhold work for mixed-use buildings?
Current commonhold rules have been criticised for not providing enough flexibility for developments that feature both residential and commercial units. New measures, called sections, have been proposed to address this.
Under this system, developers would be able to separate out different interests and costs in the same commonhold, for example shops beneath a block of flats. Although sections would normally be created at the outset, commonholders would have the option to make changes in the future.
What other changes have been proposed?
The Bill includes introducing a £250 cap on ground rents for leaseholders and abolishing forfeiture. Under current rules, a landlord can take court action to seize someone’s property if they have a service charge debt of more than £350. This would be replaced with a new court-led process designed to create a fairer system. Forfeiture would continue for commercial and agricultural leases
What happens next?
The government has launched a consultation, which ends on 24 April 2026. This could result in significant changes to the current proposals. It’s unlikely the Bill will become law until 2028 at the earliest.
The proposed changes could, however, still have a bearing on property transactions or lease extensions that you might be considering in the months ahead. If you need more detailed advice on how the Bill might impact you, then contact any of our Residential Property, Commercial Property and Planning teams on 0330 221 8855 or residentialpropertydepartmentemail@attwaters.co.uk
