On 27 January 2026, the UK Government published the first draft of the Leasehold Reform Act: Commonhold and Leasehold Reform Bill, marking one of the most significant changes to residential property law in decades.
Often referred to collectively as the Leasehold Reform Act, this draft legislation represents a fundamental shift in how flats and residential estates may be owned, managed, and valued in the future. For property investors, this is not a technical legal footnote. It has direct implications for asset values, mortgageability, exit strategies, and long-term portfolio planning.
At TK Property Group, we believe investors need to understand not just the headlines but the practical consequences of the Leasehold Reform Act and how it could reshape the UK residential investment landscape over the coming years.
What Is the Leasehold Reform Bill?
The draft Commonhold and Leasehold Reform Bill is designed to modernise the UK’s long-standing leasehold system and accelerate the transition towards commonhold ownership.
Leasehold has been criticised for decades due to unfair ground rents, limited leaseholder control, costly extensions, and aggressive enforcement mechanisms. The Leasehold Reform Act seeks to address these systemic issues while creating a more transparent and consumer-friendly framework for future housing.
The Bill is the culmination of years of consultation, Law Commission recommendations, and political pressure to reform a system widely viewed as outdated and unbalanced.
Official draft legislation can be found here.
Key Details of the Draft Leasehold Reform Act
The draft legislation introduces several major reforms that investors must understand in detail.
1. Revitalising the Commonhold Structure
One of the core aims of the Leasehold Reform Act is to make commonhold ownership genuinely workable.
Commonhold allows flat owners to own their unit outright while jointly managing the building, removing the traditional landlord and lease structure. Historically, commonhold has failed to gain traction due to complexity, lender hesitation, and developer reluctance.
The draft Bill proposes reforms to simplify governance, improve flexibility, and increase lender confidence. The intention is to eliminate many of the frustrations associated with leasehold ownership while giving residents greater long-term control.
2. Prohibiting New Leasehold Flats
Under the Leasehold Reform Act, newly built flats will largely be prohibited from being sold as leasehold.
Instead, commonhold is expected to become the default ownership structure for future apartment developments. This represents a major structural shift for developers, investors, and lenders alike.
While houses were already largely protected from leasehold abuse, this change directly affects the future supply of investment-grade flats across the UK.
3. Easier Conversion to Commonhold
The draft Bill proposes lowering the threshold required to convert existing leasehold buildings to commonhold. Early indications suggest this could be reduced to around 50% leaseholder consent, compared to the current near-unanimous requirement.
For investors holding leasehold flats, this introduces both opportunity and complexity. Buildings may transition over time, altering management structures, service charge frameworks, and resale dynamics.
4. Abolishing Forfeiture for Long Residential Leases
One of the most historic and controversial elements of leasehold law is forfeiture, which allows landlords to repossess a lease over relatively minor breaches.
The Leasehold Reform Act proposes abolishing forfeiture for long residential leases, replacing it with fairer and more proportionate enforcement mechanisms.
For investors, this reduces extreme downside legal risk while increasing clarity around dispute resolution.
5. Capping Existing Ground Rents
Ground rents on existing leases will be capped at £250 per year, with a long-term pathway towards reducing them to a peppercorn after 40 years.
This change directly impacts cash flow models for investors holding leasehold properties with ground rent obligations, while also improving mortgageability and resale prospects for affected units.
Importantly, this reform will apply gradually, meaning investors need to factor timing and transitional arrangements into long-term planning.
6. Regulating Estate Rentcharges
The Bill also proposes converting estate rentcharges into regulated rentcharges, removing outdated enforcement powers and providing protections for freehold homeowners on managed estates.
This reform affects freehold investment properties within private estates, particularly newer developments with communal infrastructure.
Why the Leasehold Reform Act Matters to Property Investors
1. Impact on Valuation and Saleability
Properties with onerous ground rents or unfavourable lease terms have historically suffered from valuation discounts and mortgage restrictions.
The Leasehold Reform Act may improve the long-term saleability of these assets, particularly for investors planning future exits. However, the transition period could create short-term valuation uncertainty.
2. Flipping the Future New-Build Market
With new flats moving towards commonhold, the future buyer profile may shift more heavily towards owner-occupiers rather than yield-focused investors.
Commonhold ownership often appeals to long-term residents seeking control rather than investors prioritising simplicity and exit flexibility. This could influence pricing dynamics in new-build developments.
3. Portfolio Planning Considerations
Investors holding multiple leasehold flats must now assess exposure across their portfolios. Ground rent income changes, management structures, and conversion risks should be reviewed carefully.
The Leasehold Reform Act reinforces the importance of diversified portfolios and proactive asset management.
4. Mortgage and Lending Implications
Ground rent caps and clearer ownership structures may increase lender confidence over time. Properties previously considered unmortgageable due to escalating ground rents may re-enter mainstream lending criteria.
This could improve refinancing options and liquidity for investors.
5. Legal and Compliance Risk
The introduction of new conversion rights and enforcement mechanisms means investors must review lease terms carefully. Failing to understand how the Leasehold Reform Act applies to individual properties could expose investors to avoidable legal risk.
Parliamentary debate on the Bill can be reviewed here.
What Property Investors Should Do Next
The Leasehold Reform Act is still a draft Bill and will undergo consultation, committee review, and amendment before becoming law. That said, investors should not wait for final implementation to act.
Key next steps include:
• Monitoring the Bill’s progress through Parliament
• Reviewing existing portfolios for leasehold exposure
• Stress testing long-term income assumptions
• Seeking legal and tax advice before future acquisitions
• Reassessing new-build investment strategies
Professional guidance at this stage can prevent costly mistakes later.
Conclusion: Leasehold Reform Act
The publication of the first draft of the Leasehold Reform Act signals a fundamental shift in UK residential property ownership.
For property investors, the implications extend far beyond headline reforms. Valuation, demand, lending, and long-term strategy will all be influenced by how leasehold and commonhold structures evolve.
At TK Property Group, we help investors navigate regulatory change with clarity and confidence. If you want tailored guidance on how the Leasehold Reform Act may affect your investment strategy, speak to our team today.
Contact us for a personalised consultation.
Free consultation options are available here.
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