The shift from leasehold to commonhold represents a historic move toward a ‘fairer and more democratic’ system of property ownership in England and Wales.
While leaseholders have long been described as operating under a “feudal” model, commonhold empowers residents as absolute owners of their homes and collective managers of their buildings.
The Draft Commonhold and Leasehold Reform Bill, published on January 27, 2026, aims to make commonhold the default tenure for new flats and provide a clearer pathway for existing buildings to convert.
PERPETUAL OWNERSHIP vs DIMINISHING LEASES
In a commonhold, you own the freehold of your flat outright.
- Leasehold: Ownership is a time-limited right (typically 99 to 999 years). As the term shortens, the property’s value can drop sharply, eventually requiring expensive lease extensions.
- Commonhold: There is no expiration date. Ownership is indefinite, removing the financial anxiety and legal costs associated with “wasting assets”.
ELIMINATION OF FINANCIAL BURDENS
Commonhold removes several contentious costs inherent to the leasehold system.
- No Ground Rent: Commonhold owners do not pay ground rent to a third-party landlord. For those still in leaseholds, the 2026 Bill proposes a £250 annual cap starting in 2028, eventually phasing out to a “peppercorn” (zero) after 40 years.
- No Marriage Value: Under the Leasehold and Freehold Reform Act 2024, the requirement to pay “marriage value” (a share of the potential value increase) when extending a short lease has been removed, making it cheaper to transition toward fuller ownership.
DEMOCRATIC CONTROL AND TRANSPARENCY
Buildings are managed by a Commonhold Association, a limited company where every unit owner is a member and director.
- Direct Management: Residents decide on budgets, maintenance, and contractors directly, rather than relying on an external freeholder who may have different financial incentives.
- Service Charge Fairness: While costs like insurance and repairs remain, they are managed transparently. Residents can ensure they aren’t being overcharged by managing agents or paying for a landlord’s legal fees.
- Rules (CCS): Instead of complex individual leases, the entire building follows a single Commonhold Community Statement (CCS), which residents can update as their needs change.
ABOLITION OF FORFEITURE
One of the most significant legal protections in the 2026 Bill is the abolition of forfeiture.
- Old System: A leaseholder could theoretically lose their entire property over a debt as small as £350.
- New System: This “draconian” measure will be replaced by a fairer, court-led enforcement scheme for unpaid costs, ensuring homeowners cannot be evicted for minor breaches.
EASIER CONVERSION
Previously, converting an existing block to commonhold required 100% agreement from all leaseholders, which was nearly impossible.
- The new reforms propose reducing this threshold to 50% of qualifying leaseholders, significantly lowering the barrier for communities wanting to escape leasehold.
- Large, mixed-use developments will be better supported through “sections,” allowing commercial and residential parts of a building to manage their affairs
While commonhold solves many ‘feudal’ issues of leasehold, it introduces new challenges related to collective responsibility and financial security
THE RISK OF INSOLVENCY
Unlike a leasehold where a professional freeholder has a financial stake in the building’s survival, a Commonhold Association (CA) is a limited company that can go insolvent.
- Debt Recovery: CAs lack the nuclear option of forfeiture (taking back a property) for unpaid fees. This means if several neighbours stop paying their service charges, the association may struggle to pay for essential services like insurance or fire safety, potentially leading to building-wide financial failure.
MANAGEMENT AND OWNER BURNOUT
Commonhold shifts the burden of building management entirely onto the residents.
- Lack of Expertise: Residents may lack the legal or technical knowledge required by complex regulations like the Building Safety Act.
- Volunteer Fatigue: Relying on volunteers to act as directors can lead to “burnout” or apathy, resulting in poor maintenance and long-term property neglect if no one is willing to take charge.
NEIGHBOUR DISPUTES AND POLITICS
In a commonhold, every major decision (from the color of the hallways to replacing the roof) requires democratic agreement.
- Conflict: Tensions can arise when some residents want to invest in improvements (e.g., energy efficiency) while others cannot afford the costs.
- Rule Changes: The Commonhold Community Statement (CCS) can often be changed by a majority vote, which may disadvantage a minority of owners.
LIMITED MARKET FAMILIARITY
Because commonhold has been rare since its introduction in 2002 (with fewer than 20 developments existing by 2025), the market is still catching up.
- Mortgage Availability: Some lenders remain cautious about commonhold due to the perceived lack of security if an association is terminated or becomes insolvent.
- Complexity for Developers: Developers find commonhold less flexible for large, multi-phase projects compared to traditional leasehold structures.
RESTRICTIONS ON SUB-LETTING
Commonhold rules typically prevent owners from letting out their units for a term of more than seven years. This is designed to ensure a stable community of owner-occupiers but can be a pitfall for those looking for long-term investment flexibility.
