Sherrards: Commonhold Reform and the Future of UK Prime Residential Ownership
The publication of the draft Commonhold and Leasehold Reform Bill on 27 January 2026 has sparked significant discussions. The government unveiled its proposals to make commonhold the default tenure for flats and multi-unit developments, with a clear aim to phase out the leasehold system. This move forms part of the broader leasehold reforms, aiming to provide homeowners with greater autonomy and fairness.
In this LPF Insider piece, Caroline Vernon of Sherrards (an LPF Member) examines the evolving legislative landscape, the practical realities of transitioning away from leasehold, and what these reforms could mean for developers, investors and advisors operating at the top end of the market.
What is proposed is a ban on new leasehold flats as the Labour government takes steps to honour its manifesto commitment to ensure commonhold becomes the default tenure. Commonhold, introduced in 2004 under the Commonhold and Leasehold Reform Act 2002, offers a freehold alternative where flat owners hold direct ownership of their unit, and the communal areas are held in shared ownership through a commonhold association (CA).
Unlike leasehold, commonhold eliminates issues related to ground rent, service charges, and lease extensions, providing homeowners with long-term security and control. It is worth noting that owners will still be bound to contribute towards maintenance, insurance and management costs through commonhold obligations, budgets and reserve funds.
Despite its benefits, commonhold has seen limited adoption due to its rigid legal framework and concerns from lenders and developers. The government seeks to address this with a range of proposals to improve and expand the commonhold system, making it more attractive and practical for developers, homeowners, and lenders.
Why this matters?
This will obviously have a significant impact on the super prime market in London and the surrounding areas. It will affect prime mansion blocks, mixed use schemes and newly constructed high value estates. With this being a new system to the UK, buyers will not be ofay with the new regime and lenders may have a limited appetite in this area at first.
The proposed new commonhold regime is intended to reduce long-term costs and improve transparency by removing ground rent, landlord profit and complex leasehold management structures, although there may be upfront costs associated with conversion, valuation, lender consent and the establishment of a commonhold association. Ongoing costs are expected to consist primarily of service charge contributions to meet actual maintenance, insurance and reserve fund requirements, controlled directly by unit owners rather than a third-party freeholder.
Governance is vested in the commonhold association, a company limited by guarantee owned and democratically run by the unit holders, with decision-making governed by the commonhold community statement. This provides a clear statutory framework for voting, budgeting and dispute resolution, enhancing accountability while reducing scope for abuse and opaque charging practices seen in traditional leasehold arrangements.
Key Proposals for Change
Flexibility in Management: The introduction of “sections” within commonhold developments will allow different areas or groups of units to be managed separately. This will be crucial in mixed-use buildings and complex estates, enabling CA’s to fairly apportion costs and limit voting to specific decisions which just affect those areas or groups of units. This will work well where there are a number of commercial units dispersed amongst a building with residential apartments incorporated, such as the Shard or One Hyde Park.
Financial Protections: New rules will mandate reserve funds to mitigate unexpected costs, and unit holders will have a greater say in budgeting decisions. The ability to challenge excessive expenditure will help keep commonhold developments financially sound.
Improved Dispute Resolution: The current process for resolving disputes between unit holders will be streamlined, with less paperwork and more accessible processes through tribunals, aiming to prevent costly court procedures.
Stronger Minority Protections: Measures to prevent majority owners from unfairly imposing decisions will be introduced, allowing minority unit holders to challenge certain decisions at the tribunal.
Debt Recovery and Enforcement: In response to concerns about unpaid debts in the absence of a landlord, the government proposes that CA’s will be able to apply to the court for an expedited order to sell a unit if the owner fails to pay their share of costs. There will also be safeguards, including protections for lenders, such as ability to control the sale process or add debt to the mortgage.
Winding Up Commonhold: The White Paper proposes improving the voluntary termination process for commonhold developments, ensuring owners have a chance to vote, and safeguard the interests of all parties when a commonhold development becomes insolvent.
Converting Leasehold to Commonhold: A crucial area of reform still under consideration is the process for converting existing leasehold properties to commonhold, including addressing the issue of non-consenting leaseholders. This is an area where further consultation and legislative proposals are expected. The current Act requires 100% participation at present however, the Bill proposes to allow conversion to commonhold with a majority of leaseholders, proposed as 50% subject to final legislation.
The Road Ahead
Although a new concept to England and Wales, forms of commonhold have long since operated in many jurisdictions, although the terminology and legal structures vary. Australia and New Zealand operate strata title systems, while Canada (notably British Columbia and Ontario) uses condominium ownership. In the United States, condominiums and common interest developments perform a similar role, as do sectional titles in South Africa. Across Europe, comparable regimes include copropriété in France, Wohnungseigentum in Germany and Austria, propiedad horizontal in Spain, and apartment ownership systems in the Netherlands and the Nordic countries. In each case, individual owners hold a proprietary interest in their unit together with shared ownership and democratic governance of common parts, broadly reflecting the core principles of commonhold.
The Bill lays the foundation for substantial reforms in commonhold law. The success of these changes will depend on the outcome of the pre-legislative scrutiny. The government’s consultation with the industry closed on 24 April 2026, so we await the government’s response on scope, timing, exemptions and transitional arrangements. The final Bill is likely to be introduced into Parliament in late 2026 and the earliest date it will be come law is 2027 to 2028.
Commonhold could present an opportunity to move away from the complexities and costs associated with leasehold ownership. However, the real challenge lies in the transition. Commonhold developments will require careful management from the outset, and a well-thought-out approach will be essential to avoid the pitfalls that plagued the leasehold system. It could allow standardised documentation which would speed up and aid the negotiation process.
So far commonhold has failed to take off, since the Act was implemented in 2002 fewer than 20 developments have been built comprising fewer than 200 commonhold units. As a Real Estate lawyer there is a real fear about committing clients to this system, until the market and particularly lenders are on board with this new style of ownership.
This legislation is of course in line with the government’s wider reform in the leasehold sphere, the proposal to cap ground rents, measures to address unfair costs and practices, and the abolition of marriage value.
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