UK Leasehold Reform 2026: What Buyers and Owners Need to Know

In early 2026, the UK government published the draft Commonhold and Leasehold Reform Bill, described by many industry bodies as a major milestone in reforming residential property ownership in England and Wales. This is not just a topic for lawyers — it will directly affect anyone preparing to buy a UK property or who already owns UK residential property: what type of ownership will you be buying in future? How will your existing property’s costs and risks change?

This article sets out the key points of this reform in a clear, simple way, and explains what these changes mean from the perspective of both buyers and existing owners. It also briefly connects to the related legislation already passed in 2024, so you can understand the reform path as a whole.

What Is This Bill Changing? Three Key Directions

The UK’s leasehold system has a long history, but its problems have also built up over many years: opaque ground-rent terms, unpredictable costs, and limited say for residents over building management, leading to persistent disputes. This draft Commonhold and Leasehold Reform Bill mainly changes the status quo across three directions.

1. New-Build Homes: Gradually Moving Away From Traditional Leasehold, Promoting Commonhold

One core element of the draft bill is a significant restriction on new-build homes continuing to use the traditional leasehold structure, especially for flats. The government wants commonhold to gradually become the default form of ownership for new-build homes going forward.

Under the current model, many new-build flats are sold on long leases (for example, 99 or 125 years), with the developer or a third party retaining the freehold in perpetuity and earning long-term income through ground rent and partial management rights. Under the commonhold model, each owner directly owns their own unit, while jointly holding the building’s structure and common parts through a commonhold association — this differs, in legal form and management structure, from the traditional freehold of a standalone house, but it likewise means there is no longer a third-party freeholder collecting ground rent.

In its explanatory documents, the government stresses that this gives residents more direct control over the building they live in and reduces disputes caused by the separation of management authority.

2. Existing Leasehold: A Cap on Ground Rent, Trending Long-Term Toward “Peppercorn,” but Not Taking Effect Immediately

Another widely watched element is capping ground rent on existing leasehold properties, compressing it toward a nominal level over the long term.

According to the draft bill and government announcements:

• For regulated residential leases, ground rent will be capped at £250 per year, with any amount above that no longer legally collectible.
• After about 40 years, this cap will be reduced further to “peppercorn,” meaning ground rent is effectively no longer charged at all.

It’s worth specifically noting: this “£250 cap + eventual reduction to zero” arrangement is, for now, still only a draft design. Even if the bill completes its legislative passage within the next year or two, the specific implementation timetable and transitional arrangements are not expected to fully land until around 2028, and will be phased in rather than taking effect “announced today, effective tomorrow.”

In the past, some leases included clauses for ground rent to double periodically or rise with an index, leaving owners facing very high fixed costs after several decades of ownership, which also affected resale and mortgage approval. The goal of the new arrangement is to end this type of “ground-rent income model,” making owners’ long-term holding costs more predictable — but buyers and owners should also note that there is still a transition period before the cap effect is genuinely felt.

3. Forfeiture: Abolishing the Repossession Mechanism Seen as a “Feudal Relic”

Currently, in certain circumstances, if a leaseholder falls into arrears on ground rent or service charges by a certain amount or duration, the freeholder can apply, through the forfeiture process, to repossess the entire unit. This practice has long been criticized as disproportionate to the amount owed, and remains one of the few “feudal relics” still present in the UK’s system of property ownership.

The draft bill proposes abolishing this traditional forfeiture mechanism in favor of a more “proportionate” way of recovering arrears — for example, through court-approved debt enforcement, rather than directly stripping the owner of their entire ownership. At the same time, for the estate-rentcharge mechanism used by some freehold estates, the bill also proposes tightening some of the harshest enforcement measures, to avoid situations that amount to disguised forfeiture.

For leasehold owners’ security of tenure, this is a structural change, not a minor adjustment of detail.

How Does This Connect to the 2024 Reform? The 990-Year Lease Term and Expanded Rights Already Went First

Many reports lump the 2024 and 2026 reforms together, but in fact the two follow a “relay” relationship, one after the other.

The Leasehold and Freehold Reform Act 2024, already passed and granted Royal Assent, laid the “first layer of foundation” for leaseholders, including:

• Allowing leaseholders to extend their lease term to 990 years in one go, rather than the previously common 90 years.
• Removing the requirement that a leaseholder must have owned the property for two years before applying to extend the lease or pursue collective enfranchisement.
• Strengthening service-charge transparency, giving leaseholders the right to request an itemized breakdown of costs.

The 2026 Commonhold and Leasehold Reform Bill builds on this foundation to further address:

• Capping ground rent and reducing it to zero over the long term.
• Abolishing forfeiture and related harsh enforcement mechanisms.
• Promoting commonhold as the default ownership form for new-build flats, and completing its legal framework.

In other words, the 2024 reform mainly “strengthened leaseholders’ extension rights and procedures,” while the 2026 reform is “reshaping the entire ownership structure and risk allocation.”

The System Is Changing — the Key Is to Ask a Few More Questions Before Deciding

The draft Commonhold and Leasehold Reform Bill is still at the draft stage, and details and the timetable may still be adjusted as it goes through parliamentary scrutiny; the actual implementation date of key policies such as the ground-rent cap will most likely also be several years away, not immediate. But one thing is certain: the UK’s residential ownership system is moving in the direction of “reducing the influence of feudal-style leasehold and increasing residents’ rights.”

The core impact of this reform can be summarized as a fundamental change to the ownership structure and long-term risk faced by both future buyers and existing owners.

For future buyers, new-build homes on the market will gradually move away from traditional leasehold, with the mainstream becoming commonhold, or leasehold with an ultra-long term (such as 990 years) plus close-to-zero ground rent. This means the ownership structure of the property you buy in future will be clearer and more transparent, with more predictable long-term holding costs, fundamentally reducing the financial risk that comes from a shortening lease term and surging ground rent.

For existing owners, the reform brings a significant reduction in risk. Ground rent will be capped and eventually trend to zero, removing the underlying threat of ground rent spiking; at the same time, the most extreme form of the forfeiture mechanism will be abolished, giving owners more solid security of tenure. This is especially significant for properties with a short remaining lease term or high ground rent, where legal risk will be substantially reduced. However, it will still take time for the market to fully absorb these benefits, and owners should still proactively review their own lease and make use of rights already in effect from the 2024 reform (such as extending the lease to 990 years) to further optimize their ownership position.

In short, the reform is pushing UK residential ownership away from an old model that was “complex and carried uncontrollable risk,” toward a new model that is “clearly structured and has controllable risk.” Before making a major buying, selling or lease-extension decision in future, confirm the latest rules with a legal and financial adviser, and when viewing a property, ask a few more key ownership-related questions.

Have a question about this guide? Leave a comment below, or ask Zagdim directly.