Government announces major leasehold reform proposals – Why leaseholders should still rely on today’s law

On 27 January 2026, the Government published its long‑awaited Draft Commonhold and Leasehold Reform Bill, signalling what it described as “the beginning of the end” of the current leasehold system. The proposals are wide‑ranging, high‑profile and, if implemented, will reshape long leasehold ownership in England and Wales. But despite the headlines, none of these proposals is law yet — meaning leaseholders should continue to rely on the current legal framework, particularly for decisions on ground rent obligations, lease extensions and purchasing the freehold of their building.

Before turning to the outline what the latest set of reforms are intended to do let consider what parts of reforms from the Leasehold and Freehold Reform Act 2024 have implemented and which parts have stalled.

Abolition of the “two-year ownership rule” (commenced)

Leaseholders no longer need to wait two years after buying a flat before they can extend their lease. This came into force on 31 January 2025 via commencement regulations.

Reforms to the Right to Manage (RTM)

From 3 March 2025 some RTM provisions started, including:

• Raising the non-residential floor space limit from 25 % to 50 % for eligibility; and
• Each party bears their own RTM claim costs (unless the First-tier tribunal orders otherwise)

Miscellaneous amendments

Certain technical amendments were made to rent charge arrears, cost recovery via service charges, and repeal of provisions in the Building Safety Act 2022 (Section 125).

Many of the most significant reforms in the 2024 Act have not yet been commenced and are awaiting secondary legislation, detailed regulations, or further policy decisions for the government, this is what is outstanding:-

Standardised 990-year lease extensions (are not yet in force)

A ground rent cap (not yet in force)

For the purpose of calculating a flats statutory lease extension premium. The 2024 Act proposed a cap of 0.1% of the flat value on the loss of ground rent calculation for lease extension and enfranchisement claims.

Abolishing Marriage Value (not yet in force)

Marriage value is the theoretical increase in a flat value following a lease extension. Marriage value is payable where the lease term drops under 80 years, usually leaseholders are required to pay 50% of this figure as part of the cost of extending their lease or in the context of an freehold purchase.

This is the big reform item that leaseholders with short leases were banking on. This reform is unlike to be commenced until 2027 or 2028 and has been subjected to failed legal challenge by a number of large freeholders.

Removal of restrictions on repeated enfranchisement and extension claims (not yet in force)

Currently a claim cannot be commenced within 12 months of the notice of claim ceasing to have effect.

Change of non-residential limit on collective enfranchisement claims (not yet in force)

The 2024 Act is supposed increase the limit on non-residential floor space in collective enfranchisement claims over mixed used building to 50% from 25%.

Eligibility for enfranchisement and extension of houses and flats—specific cases (not yet in force)

The 2024 Act is supposed to remove the ability of a landlord to prevent:

• a lease extension or enfranchisement where the landlord proposes to redevelop
• a lease extension or enfranchisement of a house where the landlord intends to go into occupation
• a lease extension or enfranchisement of a house where a public body produces a certificate that the property will be required for a relevant development in ten years or less

Acquisition of intermediate interests in collective enfranchisement (not yet in force)

The 2024 Act is supposed to implement:

– Compulsory Route, where the nominee purchaser is required to acquire a lease

– Compulsory Route, where the participating tenants choose whether the nominee purchaser should acquire a lease

Right to require leaseback by freeholder after collective enfranchisement (not yet in force)

There is a new right for tenants in a collective enfranchisement to require freeholders to take a leaseback of any units which are not let to participating tenants, which would include commercial units. This will be beneficial to qualifying leaseholders as it will reduce the premium payable for the freehold, and it will place the landlord into the position of being intermediate landlord to the non-participating tenant(s).

Peppercorn rent for lease extensions of houses and 990 year new term (not yet in force)

Lease extensions of houses will, rather than requiring payment of modern ground rent, require:

• the new lease to be at a peppercorn rent (other than for shared ownership leases, in respect of which rent will continue to be payable for the landlord’s share of the premises)
• payment of a premium (previously there was none)

New method for calculating price payable in Enfranchisement & lease extension claims (not yet in force)

There remains very little clarity around how this aspect of the reforms will be implemented. Despite the government’s commitment to consult on the issue last summer, no consultation has taken place. The eventual implementation approach will play a decisive role in determining the extent of any savings for leaseholders.

Costs of enfranchisement and lease extensions of houses (not yet in force)

Under the new Act, you will no longer have to pay this fee to your freeholder. However, while this is positive news for leaseholders, it’s highly contentious for freeholders,

Landlord’s Costs of enfranchisement and lease extension claims no longer payable (not yet in force)

The existing costs regimes for enfranchisement and lease extensions of flats (where leaseholders are required to pay certain freeholder valuation and legal costs are replaced with a new regime whereby the landlord’s would bear more of their own professional costs of the process.

Right to vary long lease—peppercorn rent (not yet in force)

Introduces a right for certain leaseholders to vary a “qualifying lease” so that the whole, or part, of the rent payable is reduced to a peppercorn rent. The practical significance of this provision would be diminished by the proposed ground rent cap contained in the 2026 Bill.

What Has the Government Proposed in the new 2026 Bill?

The draft Bill would introduce significant reforms, including:

1. Ground Rent Cap

The Government proposes to cap ground rents for most existing leases at £250 per year, with the rent falling to a peppercorn after 40 years.  A peppercorn is legal phraseology for zero ground rent.

This marks a major shift from previous approaches and would affect leases granted before the Leasehold Reform (Ground Rent) Act 2022.

2. Ban on Most New Leasehold Flats

In future, most new flats would no longer be sold as leasehold. Instead, developers would be required to use commonhold ownership, with limited exceptions.  At the moment it is not clear how lenders will react to or deal with these changes.

3. Easier Conversion to Commonhold

Existing leaseholders would gain improved rights to convert their building to commonhold where at least 50% agree, simplifying a currently challenging process.

4. Abolition of Forfeiture

The Bill would abolish the current forfeiture regime — under which a leaseholder can theoretically lose their home over relatively small arrears — and replace it with a court‑supervised enforcement process.

5. Additional Protections and Reforms

Further proposals include regulating rent charges on freehold estates, modernising commonhold management structures, and creating tailored cost‑pool systems for mixed‑use buildings.

Why Leaseholders Should Not Delay Action Now

Despite the bold commitments, these changes are not yet law. The draft Bill is only at the pre‑legislative scrutiny stage, meaning Parliament must still examine it, amend it, and eventually pass a formal Bill — a process that could take years. The Government has itself indicated that even the ground rent cap might not come into force until late 2028, subject to parliamentary approval.

This uncertainty matters because:

1. Ground Rents Remain Payable Under Existing Leases

Until any cap becomes law, leaseholders must continue paying their contractual ground rent. Arrears today could still lead to enforcement action under the current regime, including (in theory) forfeiture.

2. Lease Extension Costs Are Still Governed by the Current Valuation Model

The proposals do not change the statutory calculus for premium valuation at this stage. Market conditions — including the all‑important 80‑year threshold — continue to apply now. Delaying a lease extension in the hope that future reforms will reduce costs could backfire, especially if the lease drops below 80 years, increasing the premium payable.

3. Legal Challenges Are Possible

Commentary already notes that aspects of the ground rent cap could face legal challenges from freeholders, which may delay or dilute the reforms.

4. Political Timetables Can Shift

Legislation of this scale often evolves considerably before reaching the statute book. There is no guarantee the final version will mirror the headlines announced this week.

Conclusion

The Government’s proposals represent a significant milestone and may ultimately deliver a more transparent, resident‑controlled system of ownership. But for now, the existing legal framework continues to govern ground rents and lease extensions. Leaseholders considering extending their leases, managing ground rent liabilities or planning property transactions should proceed based on current law, not anticipated reform.

If you’d like tailored advice on how these proposals may affect your lease or future plans, our team is ready to help.