First announced as a white paper in March 2025, the Commonhold and Leasehold Reform Bill has just landed. This bill continues the radical reform of the residential property sector introduced by previous legislation (such as the recent Renters' Rights Act). 

The core aim of the bill, in an attempt to fulfil the government's manifesto commitments, is to end the leasehold system and make commonhold the automatic mode of tenure for flats. Those of us who have studied land law in the past may have heard of leaseholds, but what’s a commonhold system and what does this mean for the residential property sector?

In this article, I'll explore the answers to these questions and provide an overview of the main changes proposed by this bill.

Commonhold versus leasehold

When you buy a leasehold property – for instance, a flat – you may own the right to occupy the building for a fixed amount of time, but you don’t own the land underneath the building. That land is owned by a freeholder – in this case, a landlord who has rented out that space to you and, unlike you, they own that land forever until or unless they decide to sell it.

Introduced in 2002, the commonhold is an alternative to the leasehold system. Under this system, you can own a flat for an unlimited time (like a freeholder) and manage the shared parts of the building (which include shared areas like the corridors and the entrance hall) with the other flat owners. This is through what’s called a commonhold association.

So, what does the Commonhold and Leasehold Reform Bill propose?

Banning new leasehold flats

The bill sets commonhold as the default system for new builds. This means that property developers will no longer be able to sell new flats as leaseholds.

This means that new flats will be built as commonholds. People who purchase the flats will own the ground the flat is built on and co-own and manage common areas with their neighbours.

Existing leaseholders have the option to switch to commonhold

This, like the proposed change above, demonstrates a broader overall shift towards the commonhold system – allowing existing leaseholders to benefit from these changes too.

Ground rent will be capped

Ground rent is a periodic fee paid by a leaseholder (flat owner) to the freeholder (landlord) for the right to 'occupy' the land on which a building sits. Currently, this rent can vary in amount from a 'peppercorn' (effectively zero) to hundreds of pounds per year.

The bill proposes to cap the maximum ground rent payable at £250 a year, reducing it to zero after 40 years.

Eliminating forfeiture

Those who have studied land law might recognise the term 'forfeiture' – a remedy for landlords when leaseholders have breached the terms of their tenancy contract which enables the former to end a lease early, recover the property and sell it.

The bill proposes to abolish forfeiture in long residential leases and replace it with a fairer enforcement scheme.

Reducing the 'fleecehold' approach

As if there weren't enough 'holds' to remember, a 'fleecehold' is when a freeholder who owns a house on a privately managed estate pays extra fees (called a 'rentcharge') for the upkeep of public areas (parks, roads, etc) in addition to paying council tax. The name comes from the combination of 'freehold' and 'leasehold': though it's technically a freehold as they own the land outright, the payment for shared areas feels like a leasehold – hence, fleecehold.

Currently, homeowners in fleecehold houses face harsh penalties if they don't pay the rentcharge to the management company who manages the estate. The bill proposes to remove the most extreme penalty, require rentcharges to be clearly demanded, and ensure the amounts charged are reasonable and fair. However, though the bill purports to make fleecehold ownership easier, it doesn't quite address the right of fleecehold owners to manage common areas.

All in all, it seems the changes introduced by the bill align with the dramatic reform the residential property sector has undergone for the past few years. However, as with any bill, this legislation may undergo many changes before reaching its final form.