Government publishes draft leasehold reform legislation

The government published draft legislation in January 2026 to reform leasehold in England and Wales, according to Which?¹. The draft Bill would cap ground rents at £250 a year, ban leaseholds for most new flats and introduce a new process to make it easier for existing leaseholders to convert to commonhold¹. Which? reports that the cap would change to a peppercorn after 40 years².

The draft follows the Leasehold and Freehold Reform Act, which was passed in 2024 and applies to England and Wales¹. Key provisions of that Act included making it easier and cheaper for leaseholders to buy their freehold, extending standard lease terms to 990 years, requiring freeholders and managing agents to issue service charge bills in a standardised format, simplifying challenges to unreasonable charges at a tribunal, and making it easier for leaseholders to take over management of their building¹. Only some of these measures are currently in force, as most require secondary legislation¹. Which? reports that this has been delayed by legal challenges from freeholders².

Under commonhold, each homeowner within a building owns the freehold to their own property, and the common parts are owned and managed by a commonhold association made up of the building's homeowners rather than a third-party management company¹. Commonhold was first introduced in England in 2002².

The Leasehold Advisory Service (LEASE) and the Open Data Institute found that 8% of residential leases have between 80 and 90 years remaining¹. LEASE has launched a tool to help leaseholders check how long they have left and understand their options¹. For one property searched, the tool estimated that extending the lease would cost between £4,000 and £6,000 with more than 80 years remaining, compared with almost £50,000 once it dropped below 80 years¹. The tool can check lease length on a leasehold flat or house in England or Wales and estimate the current cost of extending a lease for flats with leases of 40 years or more¹. It determines lease length by searching Land Registry data, and users need an email address, the property address, an estimate of the property's value after a lease extension and, if known, the annual ground rent¹.

The government is consulting on some of the other charges used to calculate lease extension costs under the new system, including the abolition of marriage value, an additional amount leaseholders currently pay when extending a lease with fewer than 80 years remaining¹. The consultation closes on 23 September 2026, after which further legislation will be needed to set out how the new calculations will work¹.

Why it matters for households

Ground rent was banned on new leases in 2022, so buyers do not pay it on a brand-new leasehold property or an existing one where a new lease takes effect². Existing leaseholders still pay it, and a ground rent cap was mooted in the Leasehold and Freehold Reform Bill but was not included when it passed into law in May 2024². The draft Bill would cap ground rents at £250 a year for existing leaseholders, with the change to a peppercorn after 40 years². If a lease is extended, ground rent is reduced to zero, or a peppercorn rent².

Lease length affects both property value and extension cost. A lease with fewer than 80 years remaining can seriously affect the value of a property and the amount it costs to extend, and many mortgage providers will refuse to lend on a property with fewer than 80 years left². New rules introduced in 2024 will allow leaseholders the legal right to extend their lease at any time, where previously they had to have lived in the property for at least two years². The standard lease extension term will increase to 990 years, from 50 years for houses or 90 years for flats².

Housing is devolved. In Scotland, very few homes are sold with leasehold ownership, and leasehold legislation differs in Northern Ireland¹.

What happens next

The consultation on lease extension calculations closes on 23 September 2026, after which further legislation will be needed to set out how the new calculations will work¹. The earliest the draft Bill will become law is 2027, and it is likely to be implemented over a period of time¹. The government is also reviewing responses to a 2025 consultation on measures to improve the regulation of management agents in England².