Moving To Commonhold: Out With The (Leaseh)old And In With The New?

The Government has now released the much awaited draft Commonhold and Leasehold Reform Bill, in which they have provided further detail on their proposals to move away from flats being held by homeowners under a traditional leasehold structure, and instead, implement a system of shared freehold ownership via a commonhold structure. Our snapshot summarising the principal provisions of the Bill and its impact for those invested in residential assets can be found here.

Alongside the release of the draft Bill on 27 January 2026, the Government announced a new related consultation on banning the sale of new flats on long leases and instead requiring that new flats are sold on a commonhold basis going forward (subject to certain limited exceptions such as Build to Rent or Social Rent blocks). The proposal applies to England and Wales only.

The Ministerial foreword to the consultation states that commonhold is "not merely an alternative to leasehold ownership, but a radical improvement on it", and the rationale that is given for this change is that the people who live within them should be the ones who own and manage residential buildings, not third-party landlords. The consultation document emphasises how the commonhold system promotes democratic decision-making and gives homeowners much greater control over their homes and the buildings they live in.

Of course, the Government has previously trailed the intended move to the commonhold system in the Commonhold White Paper published in March 2025 and we wrote about this last year in Commonhold A new dawn for home ownership. As we noted in that article, commonhold has been available as a disposal structure since 2004 but there has been limited uptake as developers and investors have continued to use leasehold given familiarity with the structure and the perceived complexity associated with commonhold. The consultation document also points out that commonhold was difficult to implement in mixed use buildings given its limitations but this has now been addressed in the draft Commonhold and Leasehold Reform Bill, albeit with some of the key details as to how this will work in practice unconfirmed.

Whilst the proposed ban does not apply to existing leasehold properties, the Government is seeking to encourage the conversion of leasehold buildings to commonhold by reducing the leaseholder consent threshold from the current 100% requirement to 50% of qualifying tenants. However, the proposed ban raises questions on whether banning new leasehold flats may create a two-tier market between existing leasehold flats and new commonhold flats. The consultation document acknowledges that the move to commonhold may disrupt housing supply and so a key aim of the consultation is to seek the views of interested parties on how to avoid this (at a time when indicators suggest the Government is falling behind in its objective of delivering 1.5 million new homes over the course of this parliament).

The consultation is seeking views on 5 key areas:

Scope: what should be captured by a ban on new leasehold flats?

In particular a new definition of 'flat' is proposed and the types of building to which the ban will apply are to be further defined, which will require careful consideration. The definition of a "new" flat will not just include newly built flats in a purpose built development, but will also apply to new flats created by way of a change of use, such as from office to residential. Buildings such as these will not have been designed or constructed with commonhold in mind, and as such, it may be more difficult to establish a commonhold structure in these scenarios.

Exemptions: what is the case for exemptions from the ban?

The consultation notes that there are particular exceptions in other jurisdictions where commonhold or a similar system is used – for example the consultation notes that in Australia's Capital Territory (ACT) in order to control how land is used and developed, the government retains the freehold and homes within the ACT are only sold on a leasehold basis. So there is a question as to whether Government-owned or public land could be exempt from the ban in order to reserve control. The consultation also asks whether certain excepted land should continue to be excepted when the ban is introduced (such as flying freeholds, agricultural land and contingent title). The consultation also notes that there may be particular sectors which remain better-suited to the leasehold system rather than commonhold – it notes that the elements of retirement sector may fall within this category due to the complexity of provider services and financing models.

Method: how should a ban on new leasehold flats operate as part of the approach to moving to the reformed commonhold model?

The consultation notes that enforcement of the ban will be managed by the implementation of checkpoints at various stages of the sale process, including marketing and registration, and with failure to comply being enforced through financial penalties, scaled according to the level of consumer harm.

Timing: when to commence a ban on leasehold for new flats, and what transitional arrangements might be necessary

The consultation acknowledges that the proposed ban affects a number of different parties (including developers, property agents, conveyancers and lenders as well as delivery partners such as HM Land Registry etc) and each will require sufficient time to implement new systems and processes to deal with the transition to commonhold. The consultation asks for views on transition periods and whether introduction of the ban should be staggered for different sub-sectors, perhaps starting with smaller, simpler developments. Two specific transitional arrangements are anticipated – firstly for sites where development and sale on a leasehold basis has already commenced when the ban takes effect, and secondly where the flats are being developed on land which is itself held by way of lease.

There is also an acceptance that the draft Bill in its current form is far from being ready to be presented to Parliament for consideration, and that the responses to this consultation will be key in developing the further detail that is still missing.

Costs and benefits: what will the costs and/or savings be to you or your organisation, in moving to commonhold and complying with the ban?

The consultation also requests views on sector-specific costs and efficiencies that should be taken into account.

The consultation runs until 24 April 2026 and responses can be given by completing the survey on Citizen Space or sending an email to the following address: commonhold@communities.gov.uk.

The results of the consultation, and any legislation that is subsequently enacted, will have far-reaching impacts on the residential property market and result in a fundamental shift in ownership models so we would encourage interested parties to engage with and respond to the consultation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.