Leasehold Reform Explained: What Flat Owners Need to Know

Leasehold is a form of property ownership that is common for flats in England and Wales. When a person buys a leasehold property, they own the right to occupy that home for a fixed period of time, as set out in the lease. That period is known as the lease term and is typically 99, 125 or 999 years, though shorter terms exist.

The land the property sits on, and often the building itself, belongs to a separate party known as the freeholder. This creates an ongoing relationship between the leaseholder and the freeholder that lasts for the duration of the lease.

As part of that relationship, leaseholders are usually required to pay certain charges to the freeholder or a managing agent. These typically include ground rent, a periodic payment for the use of the land, and service charges, which cover the maintenance and management of shared areas such as stairwells, roofs and communal gardens.

The lease itself is a legal document that sets out the rights and obligations of both parties. It governs what the leaseholder can and cannot do with the property, how disputes are resolved, and what happens if either party fails to meet their obligations.

One important feature of leasehold ownership is that the lease has an expiry date. As the remaining term shortens, the value of the property can fall and the cost of extending the lease tends to rise. This is one of the reasons many leaseholders seek to extend their lease well before it approaches its final years.

Leasehold has been the dominant form of ownership for flats in England and Wales for decades. Over time, a number of practices associated with the system came to be widely criticised as unfair to homeowners.

Ground rent was one of the most significant concerns. Unlike service charges, which are linked to the actual cost of maintaining a building, ground rent is a payment made to the freeholder that provides no specific service in return. Some leases contained clauses that allowed ground rent to double at regular intervals, leading to charges that increased rapidly and made properties difficult to sell or remortgage.

Service charges presented a separate set of problems. Leaseholders often had limited ability to challenge costs they considered excessive or poorly explained, and the process for disputing charges could be slow and expensive.

Forfeiture was another area of concern. Under the existing law, a freeholder can apply to court to repossess a leasehold property if the leaseholder breaches their lease, including for relatively modest unpaid debts. Critics argued this power was disproportionate given that leaseholders may have invested hundreds of thousands of pounds in their homes.

More broadly, leaseholders often had little control over how their building was managed, who managed it, or how much they were charged for major works. Campaigners and consumer groups argued for many years that the balance of power sat too firmly with freeholders.

Leasehold reform has been happening in stages since 2022. Some changes are already in force and affect leaseholders now. Others are still working their way through Parliament. The steps below cover what has already taken effect.

In January 2026, the government published the draft Commonhold and Leasehold Reform Bill. The King's Speech in May 2026 confirmed the government's intention to introduce the final bill to Parliament during the 2026 to 2027 parliamentary session. If passed, the bill would represent the most significant overhaul of residential property ownership in England and Wales in a generation.

The proposals cover several distinct areas.

A cap on ground rent for existing leases

The bill proposes to cap ground rent on existing leases at £250 per year. After 40 years from the date the cap comes into force, ground rent would reduce further to a peppercorn rate, effectively zero. The government estimates that around 770,000 to 900,000 leaseholders currently pay more than £250 per year in ground rent, with the majority concentrated in London and the South of England.

A ban on new leasehold flats

Under the proposals, developers would no longer be permitted to sell new flats on a leasehold basis. New flats would instead be sold as commonhold. Certain exceptions are proposed, including shared ownership and some home finance arrangements. This change is intended to apply to future developments rather than to existing leasehold properties.

Making commonhold the default tenure

Commonhold is an alternative form of property ownership that gives flat owners a permanent, freehold-equivalent interest in their home, with no expiry date. Under commonhold, the individual flat owner and their neighbours collectively own and manage the shared parts of the building through a commonhold association. The bill proposes a comprehensive new legal framework designed to make commonhold practical and attractive for homeowners, lenders, and developers, addressing the barriers that have prevented its widespread adoption since it was first introduced in 2002.

Abolition of forfeiture

The bill proposes to abolish forfeiture for long residential leases and replace it with a fairer enforcement system. Under the proposed replacement, courts would have the power to grant remedies that are proportionate to the breach, with judicial oversight required before any enforcement action could threaten a leaseholder's home.

Easier and cheaper lease extensions and freehold purchases

The bill also aims to fix technical errors in the Leasehold and Freehold Reform Act 2024, which was passed at speed before the 2024 general election and contains flaws that have prevented its main provisions from coming into force. Once corrected, the 2024 Act's reforms are intended to make it cheaper and easier for leaseholders to extend their lease or buy their freehold.

One of the most common questions from leaseholders is when these reforms will actually make a difference. The honest answer is that the timeline remains uncertain, and different measures are expected to take effect at different times.

The bill is expected to be formally introduced to Parliament in autumn 2026, following pre-legislative scrutiny by the Housing, Communities and Local Government Select Committee, which published its report in May 2026. The committee recommended that the bill receive its Second Reading before the November 2026 recess, with Royal Assent targeted for mid-2027.

Even after Royal Assent, most provisions will require further regulations before they take effect. The table below sets out the current expected timetable for each measure, based on government statements and the Select Committee's recommendations as at June 2026.

Forfeiture abolished.
Expected shortly after Royal Assent. If the bill passes on schedule, this could take effect from mid-2027. This is one of the few provisions with a fixed commencement date built into the draft bill.

Commonhold available for new builds.
The government expects commonhold to be available as a tenure for new developments before the end of the current Parliament.

Ground rent capped at £250 per year.
The government's own estimate puts this at late 2028 at the earliest. The Housing, Communities and Local Government Select Committee has recommended bringing this forward to late 2027. Nothing is confirmed until the bill becomes law.

Ground rent reduced to zero.
This would take effect 40 years after the ground rent cap commences. The exact date therefore depends on when the cap itself comes into force.

Ban on new leasehold flats.
The government has indicated this is unlikely to come into force until after the next general election. The consultation on scope and exemptions closed in April 2026 and the government is still analysing responses.

Cheaper lease extensions and freehold purchases.
These changes depend on further primary legislation to fix technical flaws in the Leasehold and Freehold Reform Act 2024, as well as further secondary legislation and consultation on valuation rates. No confirmed date is available.

While the most significant proposed reforms are not yet in force, leaseholders in England and Wales already have a number of legal rights that are worth understanding.

Service charges

Leaseholders have the right to request a written summary of service charge costs from their landlord. Charges can be challenged at the First-tier Tribunal (Property Chamber) if they are considered unreasonable. Where major works are planned and costs are expected to exceed £250 per leaseholder, the landlord is generally required to consult leaseholders before proceeding, under a process known as Section 20 consultation.

Service charge money must be held in a separate trust account at a regulated financial institution, providing some protection if a landlord or managing agent encounters financial difficulties.

Buildings insurance

Leaseholders have the right to request information about their buildings insurance policy, including the amount of commission paid to the landlord or managing agent as part of the arrangement. Charges related to insurance can also be challenged at the First-tier Tribunal if they appear unreasonable.

Right to Manage

As covered earlier in this guide, leaseholders in eligible buildings can apply to take over the management of their building through the Right to Manage process, without needing to buy the freehold. At least 50% of qualifying leaseholders must participate, and a Right to Manage company must be set up to take on the management functions.

Lease extension and freehold purchase

Most leaseholders with a long lease have a statutory right to extend their lease or to join with other leaseholders to buy the freehold of their building. The rules governing eligibility, the process, and the cost of doing so are set out in leasehold legislation and are the subject of ongoing reform.

Challenging poor management

Leaseholders who are unhappy with how their building is being managed can apply to the First-tier Tribunal to appoint a new manager in certain circumstances. The tribunal has the power to make a management order if it is satisfied that the current management arrangements are unsatisfactory.

For many leaseholders, one of the most pressing practical questions is whether to extend their lease now under the existing rules, or wait for the proposed reforms to take effect and potentially reduce the cost.

There is no single answer that applies to everyone. The right approach depends on several factors specific to the individual property, lease, and leaseholder's circumstances.

Factors that favour acting now

The cost of extending a lease tends to rise as the remaining term falls. Once a lease drops below 80 years, a calculation known as marriage value becomes payable. This can significantly increase the cost of a lease extension. Although the proposed reforms include the abolition of marriage value, this change is not yet in force and the timeline for it remains uncertain.

Leasehold reform has been promised across successive governments since at least 2017. Those who have waited for reform to reduce costs have, in some cases, seen their lease shorten further and their extension costs increase in the meantime.

Acting under the current rules also provides certainty. The statutory process, though sometimes slow, is well established and understood by solicitors and valuers.

Factors that favour waiting

If the proposed reforms do come into force as planned, they are expected to make lease extensions cheaper for many leaseholders, particularly through the removal of marriage value and changes to the valuation rates used to calculate the premium.

For leaseholders whose lease still has many years remaining and who are not planning to sell or remortgage in the near term, the financial impact of waiting may be limited.

The 80-year threshold

This is a widely recognised practical marker. A lease with fewer than 80 years remaining is generally considered to be approaching a point where extension costs rise more sharply. Many mortgage lenders also have requirements around minimum lease length, which can affect the ability to sell or remortgage a property.