Changing the Rules of Homeownership: A Guide to the Leasehold and Freehold Reforms

The rules governing who owns and controls residential property in England and Wales are undergoing their biggest shake-up in a generation. For decades, buying a flat meant entering the complex world of leasehold, a system that often left buyers dealing with rising ground rents, expensive lease extensions, and disputes with freeholders. 

A dual-track legal overhaul aims to permanently shift power away from traditional landlords and give it back to homeowners. This transition is being driven by two major pieces of legislation, the Leasehold and Freehold Reform Act 2024 et the Draft Commonhold and Leasehold Reform Bill 2026. 

The Leasehold and Freehold Reform Act 2024: Current Status and the Court of Appeal Battle 

The Leasehold and Freehold Reform Act 2024 became law in May 2024, but its implementation has faced a complex rollout. Freeholders immediately mounted significant legal resistance, arguing that the legislation’s radical structural changes amounted to an unlawful deprivation of property rights under Article 1 of the First Protocol (A1P1) to the European Convention on Human Rights (ECHR). 

The Judicial Review and the Impending Appeal 

In October 2025, the High Court delivered a comprehensive 167-page judgment dismissing the freeholders’ judicial review claims. The court ruled that the government acted within its discretionary powers to correct a systemic, anti-competitive imbalance in the housing market. 

However, the legal battle is far from over. On 1 April 2026, the Court of Appeal formally granted permission to appeal to five major institutional freeholder groups. This second round of high-stakes litigation is scheduled to be heard in late 2026 or early 2027. 

The freeholders’ appeal focuses directly on three core pillars of the 2024 Act: 

1. The Abolition of Marriage Value: The 2024 Act eliminates “marriage value”, the hypothetical profit generated when a lease with fewer than 80 years remaining is extended. Under the old system, this value was split equally between the leaseholder and freeholder. Freeholders argue that removing this share constitutes an uncompensated confiscation of asset value. 

2. The Ground Rent Valuation Cap: The Act dictates that when calculating the premium a leaseholder must pay to extend their lease or buy their freehold, the ground rent taken into account is capped, reducing the ultimate payout to the freeholder. 

3. The Legal Costs Shift: Historically, leaseholders were contractually bound to pay the freeholder’s professional, valuation, and legal fees during an enfranchisement or extension claim. The 2024 Act reverses this, dictating that each party must bear their own costs. 

Active Provisions: What is Currently Enforceable? 

Unless the Court of Appeal issues a formal injunction to stay the legislation, which is highly unlikely, the provisions of the 2024 Act that have already been triggered by commencement orders remain fully active law: 

• The Day-One Right to Enfranchise: The historical “two-year rule” has been repealed. Leaseholders no longer need to own a residential leasehold property for 24 months before issuing a statutory claim for a lease extension or a collective freehold purchase. They hold this statutory right from Day 1 of ownership. 

• The 50% Mixed-Use Commercial Threshold: Buildings featuring mixed-use layouts (such as flats built over retail units or commercial offices) can now access collective enfranchisement and the Right to Manage (RTM) if the non-residential space makes up up to 50% of the building’s total internal area. This is a major increase from the previous, restrictive 25% statutory limit. 

• Exclusion from Assured Tenancy Status: Activated via a targeted patch in December 2025, long residential leases (granted for a term exceeding 21 years) are completely excluded from being classified as assured tenancies under the Housing Act 1988. This eliminates a historical risk where a freeholder could use fast-track summary possession courts to evict a leaseholder whose ground rent exceeded £250 per year (or £1,000 in London). 

• The 990-Year Extension Standard: Once the valuation mechanisms are fully active, leaseholders will secure the legal right to extend their lease terms by a standard of 990 years at a peppercorn (£nil) ground rent, replacing the outdated 90-year statutory extension framework. Note, until the valuation mechanisms are active, the current extension period remains 90 years.  

The Draft Commonhold and Leasehold Reform Bill 2026 

While the 2024 Act modifies the existing leasehold system, the government’s next phase aims to phase it out entirely. On 27 January 2026, the Ministry of Housing, Communities and Local Government (MHCLG) published the highly anticipated Draft Commonhold and Leasehold Reform Bill. 

The draft Bill quickly progressed to formal pre-legislative scrutiny, culminating in an exhaustive review report published by the Housing, Communities and Local Government Select Committee on 27 May 2026. The executive policy clear path was further cemented by its explicit inclusion in the King’s Speech. 

The foundational pillars of the 2026 draft Bill include: 

The Mandate for Commonhold and the Ban on New Flats 

The headline measure of the Bill is an absolute ban on the creation or assignment of new leasehold flats. Instead, the legislation positions commonhold as the default legal tenure for all new multi-unit residential developments. 

Under a commonhold structure, which mirrors international condominium frameworks, individual flat buyers own the absolute freehold of their specific unit. The shared common parts of the estate are owned and managed by a Commonhold Association, a corporate entity owned 100% collectively by the unit holders. There is no external reversionary landlord, no lease term countdown, and no ground rent. 

In a major policy update delivered in a keynote speech to the Institute for Government, Housing Minister Matthew Pennycook confirmed that while the government aims to pass all core aspects of the Bill by the end of this Parliament, the absolute ban on new leasehold flats will likely not be introduced until 2029. This window gives developers and lenders time to transition their building pipelines and financial models. 

Ground Rent Caps on Existing Leases 

To address the issues faced by millions of individuals trapped within existing long leases, the Bill introduces a sweeping ground rent cap of £250 per year. 

Under the current draft terms, this cap will apply immediately to existing residential leaseholds. Crucially, the draft text contains an automatic sun-setting clause meaning, after a 40-year period, the cap drops permanently to a true peppercorn rent (£0). The government’s current legislative schedule anticipates activating the initial £250 cap around late 2027. 

Lowering the Commonhold Conversion Threshold 

Historically, converting an existing leasehold block of flats into a commonhold structure required the 100% unanimous consent of every single leaseholder and chargeholder in the building, a threshold that made conversions practically impossible in most cases. 

The 2026 draft Bill lowers this barrier significantly by introducing a simple 50% majority voting threshold. If more than half of the qualifying leaseholders in a block vote to convert, they can legally compel the remaining residents and the freeholder to transition the building into a commonhold structure. 

The Complete Abolition of Lease Forfeiture 

Under current property law, a freeholder can initiate lease forfeiture proceedings against a residential leaseholder for debts as low as £350, potentially seizing an asset worth hundreds of thousands of pounds over a minor service charge dispute. 

The 2026 Bill completely abolishes the right of forfeiture for long residential leases. It replaces this power with a proportionate, court-backed debt collection and lease enforcement regime, protecting homeowners from losing their equity over disputed fees. 

Repealing Private Estate “Fleecehold” Powers 

The draft Bill targets exploitative practices on privately managed freehold housing developments, often referred to as “fleecehold”. The legislation plans to completely repeal sections 121 and 122 of the Law of Property Act 1925. This change strips private estate management companies of their statutory rights to enter a homeowner’s property or grant an enforcement lease over a house due to unpaid or disputed estate rentcharges. 

Conclusion: A Horizon Defined by Promise, Delays, and Deep Uncertainty 

The dual progression of the Leasehold and Freehold Reform Act 2024 and the Draft Commonhold and Leasehold Reform Bill 2026 represents a historic attempt to completely reshape homeownership in England and Wales. On paper, these sweeping reforms promise a much fairer system, giving leaseholders day-one extension rights, reducing the amount payable for extending leases, shielding homeowners from aggressive property seizure, and drawing a clear roadmap toward a commonhold-first property market. 

Yet, for all the optimism and promise surrounding these legislative milestones, the immediate reality is defined by persistent delays, grinding political timelines, and deep legal uncertainty. 

Ultimately, England and Wales may be moving toward a leasehold-free future, but the transition is proving to be a marathon rather than a sprint. While the wheels of Westminster and the courts slowly turn, there is uncertainty for individuals and businesses on both sides of the property fence. 

Property Litigation/ Enfranchisement Solicitor, Ben Lewis – Contact Us  

Ben Lewis is an associate solicitor in RFB’s litigation department. For enquiries on this topic, please contact Ben Lewis via email at B.Lewis@rfblegal.co.uk ou par téléphone au 0203 947 8892.