Leasehold Reform and the Commonhold Question: Evolution or Revolution?

Article by Katherine Simpson, Partner at Edwin Coe LLP

The Leasehold and Freehold Reform Act 2024 (LAFRA) represents one of the most significant changes to residential property law in a generation. But do its most significant provisions, the abolition of the two-year ownership rule and the enhanced availability of right to manage (RTM), reduce the case for commonhold, or simply defer it?

Expanding the right to manage

RTM, first introduced by the Commonhold and Leasehold Reform Act 2002, offers leaseholders a powerful tool in the ability to take over management of their building without having to establish fault on the part of the freeholder. In practice however access to RTM was restricted by a narrow definition of a qualifying building and the 25% non-residential threshold excluded many buildings in modern mixed use developments.

LAFRA addressed this by raising the threshold to 50%, bringing a greater number of mixed-use buildings within the RTM regime. Furthermore the costs framework has been reformed so that freeholders can no longer routinely recover their legal costs from RTM companies, removing an obstacle to legitimate applications. These provisions are a meaningful expansion of a right that had more limited reach than originally intended.

The end of the two-year ownership rule

The abolition of the two-year qualifying period in 2025 is equally significant. Previously, a buyer who purchased a leasehold property could not exercise the right to a statutory lease extension or claim the freehold of their leasehold house until two years had passed following registration.

This created a period of uncertainty that complicated transactions, deterred buyers and handed leverage to freeholders negotiating informal extensions and freehold transfers in the interim. The premium for an informal agreement, and so outside of the statutory process, was almost invariably higher than a statutory one, and leaseholders in that two-year window had limited negotiating power.

LAFRA removed that restriction. Leaseholders can exercise statutory rights from day one of registered ownership, which this changes the transaction dynamic considerably. Buyers can take comfort that their statutory rights vest on registration, without a waiting period that a freeholder could exploit. Lenders also benefit from the removal of this gap in security.

Implementation lag

The direction of these reforms is positive. RTM take-up should increase as more buildings qualify and financial deterrents are reduced; the removal of the two-year rule gives the leasehold market greater transactional fluency. These are modest but meaningful improvements for leaseholders.

But measuring success is compromised by implementation lag. Much of LAFRA requires further consultation and secondary legislation. Consultation will soon begin on the rates to be applied in enfranchisement valuations. Until then, the new valuation methodology, which includes the removal of marriage value from enfranchisement valuations and the capping of ground rents at 0.1% of freehold value in such valuations, cannot be progressed.

Furthermore, the government has identified “serious flaws” in the legislation that will require amendment by primary legislation.

The full benefit of these changes will not be felt until the flaws are fixed, regulations are made, systems are updated and professionals, including practitioners, managing agents and tribunals, are fully equipped to work within the new framework.

The commonhold question

None of this directly answers the commonhold question. RTM, however effective, remains a management tool. It does not alter the fundamental structure of leasehold tenure. Leaseholders exercising RTM still own a wasting asset, still need periodic lease extensions and still operate within a legal framework in which the ultimate owner is a third party landlord. The right to manage a building is not the same as owning it.

Commonhold, as set out in the Law Commission’s 2020 report, will change that. This established a comprehensive model under which flat owners hold their individual units in freehold, sharing ownership of common areas. There will be no wasting lease, no ground rent, no requirement for periodic extension and no structural subordination of the flat owner’s interest to that of a third party freeholder. The commonhold association, controlled by the unit holders themselves, will be both manager and owner.

The success of RTM reform and the abolition of the two-year rule makes leasehold more functional but does not make it equivalent to commonhold. However, the political case for commonhold rests on the fact that it is widely seen to be preferable to leasehold.

The question of sequencing

LAFRA is a substantial piece of legislation with significant secondary legislation requirements. Pressing ahead with commonhold reform before LAFRA is fully implemented could risk reform fatigue, legislative congestion and divided attention across both programmes. Lenders, conveyancers and valuers need to understand and adapt to the LAFRA framework before a further wholesale change to tenure is introduced.

The draft Commonhold and Leasehold Reform Bill, published on 27 January 2026 is now undergoing pre-legislative scrutiny prior to being introduced to Parliament.

These pieces of legislation should be treated as parallel, not sequential, workstreams. There is however, much work to be done: much of the commonhold bill will fall to secondary legislation and practitioners will need time to be trained in the exercise of what will be a revolutionary and unfamiliar regime.

Looking ahead

Leasehold reform is genuinely welcome, but reform is not the same as replacement.

Commonhold is widely accepted as the answer to a question that LAFRA does not resolve and the political consensus is firmly in support of commonhold. The task now is to ensure that the progress made through LAFRA does not become an excuse for losing momentum on the deeper structural change represented by commonhold that the residential property market appears to be crying out for.

Katherine Simpson is a Partner at Edwin Coe LLP and a member of the Association of Leasehold Enfranchisement Practitioners (ALEP).