The government’s objective is to make ownership cheaper and easier but can commonhold deliver?

Article by Katherine Simpson, Partner at Edwin Coe LLP

The government’s language on leasehold reform remains forthright. Ministers speak of, “bringing the feudal leasehold system to an end,” of returning power to homeowners, and of making commonhold the default way to own a flat in England and Wales.

The draft Commonhold and Leasehold Reform Bill, published in January 2026, is the most concrete expression yet of that ambition. But ambition and delivery are very different things. Those of us who work in this field have good reason to read the fine print carefully.

The headlines are compelling: a £250 cap on ground rents, falling to zero after 40 years; a ban on selling new flats as leasehold; a clearer path for existing leaseholders to convert to commonhold; the abolition of forfeiture. These are genuine changes that, if implemented well, would improve the lives of millions of flat owners.

According to government officials, the ground rent cap alone is expected to benefit more than five million leaseholders. And for those whose properties have become effectively unsellable because of onerous ground rent terms, meaningful reform cannot come soon enough.

But the background tells a different story. Commonhold has been available in England and Wales since the Commonhold and Leasehold Reform Act 2002 (the 2002 Act).

In over two decades, it has been used for fewer than 20 developments, comprising fewer than 200 units. That is reflects the deep structural reasons why developers, lenders, and property professionals have consistently found the existing leasehold system easier to work with. It is perhaps optimistic to assume that a change in the law is sufficient to overcome the embedded structure that is leasehold overnight.

The management question

The management question is perhaps the most pressing. Under commonhold, the freeholder disappears. The flat owners collectively become the commonhold association, a company limited by guarantee, whose directors, drawn from the residents, take on statutory responsibilities, including filing accounts, avoiding conflicts of interest and exercising reasonable care and skill.

They can appoint a professional managing agent to handle the day-to-day work. In practice, the expectation is that they will, and that they will do so competently.

This is however, an expectation and not requirement. Scotland and Australia, where flats and apartments are owned under models similar to commonhold, mandate professional management for larger blocks. The draft Bill does not.

The protection gap

The government promises that commonhold will not merely be an alternative to leasehold ownership, but a radical improvement on it. The existing leasehold system, for all its faults, comes with decades of statutory protections for tenants, including rights to inspect service charge accounts, consultation requirements and recourse to tribunals.

Commonhold unit-owners will have the right to vote on the association’s annual budget and to apply to a tribunal if they are outvoted. But they will not have the same detailed statutory protections as leaseholders.

Furthermore, commonhold contributions are expressly excluded from some of the protections being introduced by the Leasehold and Freehold Reform Act 2024. That is a gap that needs to be closed before it can genuinely be said that the new system is superior.

The two-tier market risk

The two-tier market risk is also real. New commonhold flats will be built before the existing stock of leasehold flats converts. Conversion requires the agreement of a majority of residents.

The bill proposes reducing the previous unanimity threshold.  In the meantime, there is a genuine danger that a value gap opens between newer commonhold flats and the millions of existing leasehold properties. Existing leaseholders may find they have missed the boat.

Enforcement of unit holders’ obligations

One of the more underexamined risks in the draft bill is what happens when a unit holder simply does not pay. In the leasehold world, the ultimate sanction is forfeiture, and, while the bill rightly proposes its abolition, no equally powerful replacement has been put in its place for commonhold.

Under commonhold, the commonhold association must pursue defaulting unit holders through the county court or, potentially, by exercising a right to acquire the unit in the event of persistent non-payment of commonhold contributions. That acquisition mechanism exists in the current 2002 Act framework, but it is cumbersome, rarely used, and poorly understood. The draft bill does not meaningfully strengthen it.

In practice, this matters. Buildings require maintenance. If even one or two unit holders withhold contributions, whether through financial difficulty, dispute, or simply unwillingness, the association may find itself unable to fund essential works. The remaining unit holders are left to subsidise the deficit or face deteriorating common parts and reduced insurance cover. There is no equivalent in commonhold of the arrears recovery mechanisms available to a landlord.

The bill needs to address this more directly. Whether through a streamlined tribunal process, a statutory charge on the unit, or a mandatory reserve fund requirement, the association must have practical tools to enforce payment without protracted litigation and no funds to pay for it.

Insolvency of the commonhold association

This brings into play one of the most significant structural risk, and one that receives almost no attention in the current policy debate, is what happens if the commonhold association itself becomes insolvent. The association is a company limited by guarantee. Like any company, it can fail. It may be wound up if it cannot pay its debts. And yet the existing legal framework is profoundly ill-equipped for that eventuality.

The 2002 Act provides that, on a winding-up, the court may terminate the commonhold arrangement and vest the commonhold land in a successor commonhold association or in a conventional freeholder. In practice the mechanism has never been tested and offers no certainty about what happens to the unit holders in the interim, how their interests are protected, or how the transition is funded.

The insolvency risk is not purely theoretical. Commonhold associations will vary enormously in financial means. A small association of six unit holders managing a converted Victorian terrace has very different capacity from a purpose-built block of 200 apartments. Both will be subject to the same legal framework.

If an association fails to maintain adequate reserves, enters commitments it cannot honour, or simply mismanages its finances, the consequences fall squarely on the unit holders, who may be mortgagors, with lenders holding charges over individual units. Lenders have already expressed concern about this exposure, and it is one of the reasons mortgage lending on commonhold property has historically been difficult to secure.

The draft bill does not introduce mandatory reserve fund requirements or any equivalent of the statutory protections available to leaseholders where a service charge fund is held on trust. Until it does, insolvency risk will remain a material deterrent to both lenders and buyers.

The devil is in the detail

None of this means the reform should not happen. The leasehold system has many faults.  Escalating ground rents make properties unsellable, forfeiture threats are often disproportionate to the debt involved, and the landlord/tenant dynamic is ill-suited to the reality of property ownership. The direction of travel is right. The question is whether the detail properly covers the ambition.

Whether the government addresses the practical concerns raised by the legal and property sectors on professional management requirements, consumer protections, the conversion pathway, will determine whether commonhold becomes a genuine improvement or simply a rebranding of existing problems under a new tenure structure.

The government wants to make ownership cheaper and easier. Commonhold can do that, but only if the framework is built to a higher standard than the current draft reflects.

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