Executive Summary- Draft Commonhold and Leasehold Reform Bill

Executive Summary Table – Overview of Each Part

Part 1 — COMMONHOLD

This is the largest and most detailed Part. It:

Creates a modernised commonhold structure

• Defines commonhold land, units, common parts, unit‑holders, and the commonhold association.
• Requires every commonhold to operate under a Commonhold Community Statement (CCS).
• Provides rules for:
  • Registration of land as commonhold.
  • Required consents depending on enfranchisement history.
  • Articles of association and commonhold association governance.
  • Membership rights (including tenants under certain leases).
  • Voting, directors’ duties, and procedures for resolving internal issues.

Regulates occupation and use:

• Specifies permitted use of units and common parts.
• Imposes obligations relating to insurance, repair and building safety.

Deals with transfers and structural changes

• Regulates transfer of entire units, transfer of part of a unit, and changes to unit boundaries.
• Sets strict conditions for changing the extent of commonhold land and adding/removing land from a commonhold.

Development, termination and enforcement

• Creates rules for developer rights and termination of long‑term developer contracts.
• Provides mechanisms for:
  • Partial termination (transfer of some units to a special company).
  • Complete termination (requiring winding‑up and registration changes).
  • Compulsory purchase of commonhold land.
• Establishes enforcement powers for tribunals and courts relating to CCS compliance.

Part 2 — NEW LEASEHOLD FLATS

This Part introduces a fundamental shift away from leasehold for new flats.

Ban on new long leases of flats

• Section 109 prohibits:
  • Grant of long residential leases of flats in relevant buildings, unless a permitted lease.
  • Assignment of such leases where originally improperly granted.

Defines “permitted leases”

• Includes specialist categories such as:
  • Shared ownership leases,
  • Home finance plan leases,
  • Certain business‑related leases.

Consumer protection

• Marketing restrictions (s.117) requiring disclosure of permitted‑lease category.
• Warnings before grant of permitted leases (s.118).
• Land Registry safeguards to prevent registration where statements are missing (s.119–120).

Redress mechanisms

• If a prohibited lease is granted:
  • Leaseholder may acquire the freehold (if on commonhold land) or require conversion into commonhold (if not).
  • Right to correct inaccurate or missing lease statements.

Part 3 — GROUND RENT

• Extends reforms of the 2022 Act so that pre‑2022 long leases also have ground rent restrictions applied.
• Aims to fully eliminate ground rent income streams in modern residential leasing
• £250 Ground Rent Cap.

Part 4 — ENFORCEMENT OF LONG RESIDENTIAL LEASES

This is the Part with the biggest direct impact on landlords.

This Part abolishes forfeiture of long residential leases and completely replaces the enforcement framework.

Key Features

1. Abolition of Forfeiture (s.138)

• Landlords can no longer terminate a residential long lease for breach.
• Ends the historical disproportionate remedy

2. Introduction of the “Lease Enforcement Claim” (s.137)

• A new structured procedure for enforcing covenants.
• Applies to any breach of covenant except those specifically excluded.

3. Conditions before a claim may be issued (ss.141–147)

• Mandatory explanatory statements explaining the breach.
• Specific rules for financial breaches, including thresholds, notices, evaluation, and final determination.
• Definition of “interested parties” who must be notified.

4. Court powers (ss.148–152)

• Range of remedies replaces forfeiture:
  • Remedial orders requiring action.
  • Orders for sale (s.150), including power to terminate sub‑leases.
  • Cost orders against leaseholders.

5. Recovery of enforcement costs (s.153)

• Landlords may recover legal/enforcement costs if the lease provides for it.

6. Interpretation and amendments of other Acts (ss.154–155)

• Ensures the new enforcement model integrates with wider landlord‑tenant legislation.

Special Focus: Implications of Part 4 for Landlords

Part 4 represents the most significant reform of landlord enforcement rights in decades.

1. Loss of the forfeiture remedy

Historically, forfeiture was a powerful “nuclear option” enabling landlords to:

• End the lease,
• Recover the property,
• Retain windfall equity.

This is now abolished.
Landlords cannot terminate a long residential lease for breach.

2. Replacement with a structured, slower, more regulated procedure

Landlords must now use the lease enforcement claim framework, which:

• Requires formal notices,
• Invites response and dispute resolution,
• Often mandates tribunal/court involvement,
• Reduces landlord discretion.

It is more procedurally burdensome and easier for leaseholders to challenge.

3. Court‑ordered sale replaces forfeiture

The new “order for sale”:

• Is not automatic,
• Requires court approval,
• Must be proportionate,
• Must consider the leaseholder’s circumstances and interested parties.

Landlords will no longer:

• Obtain windfalls,
• Immediately recover possession.

Proceeds of sale will be distributed according to statutory priorities.

4. Stronger regulation on financial breaches

Landlords cannot rush to enforcement:

• Must issue explanatory statements,
• Must satisfy “final determination” requirements,
• Must comply with conditions for “financial breach” claims.

This protects leaseholders from technical defaults and minor arrears being leveraged aggressively.

5. Increased administrative and legal burden

Landlords will need:

• More documentation,
• Clear audit trails,
• Compliance with timelines,
• Legal advice for enforcement actions.

Expect higher internal compliance costs.

6. Possible shift in landlord investment behaviour

Because enforcement is harder and forfeiture windfalls are removed:

• Freehold ground rent investments may become less attractive.
• Lenders funding freehold purchases may reassess risk.
• Developers may be incentivised to use commonhold rather than leasehold.

If you have any questions and would like to speak to a member of our highly experienced Property Team please contact us at info@brethertons.co.uk or call  01295 270999 (Banbury Office), 01869 252161 (Bicester Office), 01788 579579 (Rugby Office) or 01242 472747 (Cheltenham).