On 27 January 2026, the government published its draft Commonhold and Leasehold Reform Bill for pre-legislative scrutiny — the most significant overhaul of property ownership law in England and Wales in a generation. For investors holding leasehold flats, freehold reversions, or mixed-use blocks, the implications are substantial. The bill does not simply tinker at the edges; it sets out to end the leasehold model for new residential flats entirely and fundamentally restructure the rights of existing leaseholders.

What the Bill Actually Does

The headline measures are sweeping. New leasehold flats will be banned outright, with commonhold — a system of perpetual freehold ownership where flat-owners collectively control shared areas — becoming the default tenure for all new flatted developments. Forfeiture of residential leases, long criticised as a disproportionate remedy available to freeholders, will be abolished. Estate rentcharges, which have become a source of controversy on new-build developments, will also be regulated.

On ground rents, the bill proposes capping all existing residential ground rents at £250 per year, with a further reduction to a peppercorn — effectively zero — after 40 years. The government estimates that between 770,000 and 900,000 leaseholders currently pay ground rent above £250 per year, with 490,000 to 590,000 of those concentrated in London and the South East. Implementation of the ground rent cap is targeted for 2028, giving freeholders and investors a window to adjust their positions.

The Shift to Commonhold

Commonhold has existed in English law since 2002 but has been almost entirely ignored — fewer than 20 commonhold developments exist across England and Wales. The draft bill attempts to make it genuinely workable by addressing the structural problems that killed the original regime. The most significant change is the conversion threshold: existing blocks will be able to convert to commonhold with just 50% of qualifying leaseholders consenting, down from the unanimous agreement previously required. In practice, unanimous consent made conversion virtually impossible in any building of meaningful size.

The bill also introduces sections within commonhold structures, allowing mixed-use buildings with commercial and residential components to be managed under a single framework. A new Commonhold Community Statement will codify governance, giving leaseholder-owners a clearer legal basis for managing shared costs and decisions. For developers, the shift means that any new flatted scheme will need to be structured as commonhold from the outset — a fundamental change to how development finance, sales, and long-term asset management are modelled.

What This Means for Investors

The implications differ sharply depending on what side of the leasehold equation an investor sits on. For freeholders collecting ground rent income — particularly those who acquired reversionary interests as an investment — the ground rent cap represents a direct reduction in asset value. A block generating £50,000 per year in ground rents will be capped at a fraction of that by 2028, and the income stream disappears to peppercorn after 40 years. Investors in this space should be modelling the impact on their yield calculations and considering whether early disposals make strategic sense before the cap bites.

For investors buying leasehold flats as rental assets, the picture is more nuanced. Abolishing forfeiture removes a risk that has historically made some leasehold investments difficult to mortgage, which could improve liquidity. The commonhold conversion pathway at 50% consent also means that investor-heavy blocks — where leaseholders may be motivated to act collectively — could move to self-management faster than anticipated. This could increase service charge transparency but also creates operational considerations for those currently relying on freeholder management structures.

What to Do Now

The bill is still in draft form and subject to pre-legislative scrutiny — full implementation will take time, and 2028 remains the earliest realistic date for the ground rent cap. However, the direction of travel is clear and there is no credible political will to reverse it. Investors should be auditing their portfolios now: identifying leasehold assets where ground rent income is material, stress-testing yields against the cap, and reviewing lease terms for any provisions that may need to be updated.

For those actively acquiring, the bill reinforces what has already become conventional wisdom — that short leases, high ground rents, and complex leasehold structures carry regulatory risk that is not fully priced into yields. Commonhold assets and freeholds with strong underlying values remain the more defensible long-term positions. The leasehold system that has underpinned British residential property for centuries is being dismantled. The investors who adapt earliest will be best placed when the new landscape is fully in place.