£250 rent cap confirmed as sector warns of ‘untested’ commonhold risk
The government has officially published its draft Commonhold and Leasehold Reform Bill, unveiling a comprehensive package of measures intended to “fundamentally rewire” home ownership across England and Wales. The Prime Minister announced the Bill via TikTok, framing it as the end of the “feudal” leasehold system. However, legal professionals are looking beyond the headlines to warn of a “step-change in complexity” that could leave consumers exposed to new risks.
The draft Bill proposes replacing leasehold for new flats with a reinvigorated commonhold tenure. Central to the reforms is a cap on existing ground rents at £250 per year, which will reduce to a peppercorn after 40 years. Furthermore, the legislation abolishes the draconian right of forfeiture for long residential leases, replacing it with a new statutory lease enforcement scheme. It also repeals Sections 121 and 122 of the Law of Property Act 1925, ending the disproportionate remedies currently available to rentcharge owners.
‘Untested’ and Risky Reaction from the legal sector has been mixed. The Association of Leasehold Enfranchisement Practitioners (ALEP) has welcomed the “substantial shift” in tenure, but the Society of Licensed Conveyancers (SLC) has issued a stark warning. The SLC cautions that the commonhold system remains “largely untested” at scale and places onerous governance responsibilities directly onto homeowners, who may lack the necessary legal expertise to manage them effectively.
The SLC has highlighted specific operational risks, noting that “commonhold arrangements rely heavily on collective decision-making.” They warn this creates a “greater scope for deadlock between owners” and could lead to increased reliance on tribunals when relationships within a block break down. For conveyancers, the Society predicts that the introduction of new title structures and community statements will require “careful navigation” to avoid errors that could prejudice clients.
The Bill introduces significant procedural shifts. The “without unit-holders” procedure for registering commonhold has been removed. To make the tenure more attractive to developers, the Bill introduces new flexibility for “sections” within commonholds, allowing for the better management of mixed-use developments. However, the “conversion” mechanism for existing leaseholders remains a flashpoint. While the government promises to facilitate conversion if a “majority” agree, lawyers warn that without unanimous consent, the resulting patchwork of leasehold and commonhold interests within a single block could create a management nightmare.
Ground Rent Compromise, the £250 cap represents a compromise for freeholders, ensuring an income stream remains for the time being, albeit one that will be eroded by inflation. Linz Darlington, MD of Homehold, described the cap as a “sensible choice” that avoids an immediate financial cliff-edge for investors while simultaneously resolving issues with mortgage lender criteria. As the consultation on banning leasehold flats opens, the profession’s message is clear: the legal framework must be robust before the “feudal” system is consigned to history.