What the 2026 UK Leasehold Reform Bill Means for Commercial Property Managers
The Commonhold and Leasehold Reform Bill has no confirmed start date, but for commercial property managers and directors of mixed-use buildings, that is not a reason to wait. The structural changes will take place either way, so it's essential to plan early.
Key Takeaways
• The Draft Commonhold and Leasehold Reform Bill was published on 27 January 2026. It is not yet law but is confirmed as a government priority for this Parliament.
• Mixed-use buildings face a complex transition, with new commonhold 'sections' introducing separate governance and cost pools for commercial and residential parts of the same building.
• The biggest near-term shift is not in tenure mechanics but in governance standards. Audit trails, budget approvals, reserve funds and cost allocation all face meaningfully higher scrutiny.
What the Bill actually is
The Draft Commonhold and Leasehold Reform Bill (UK) was published on 27 January 2026. It is a fully developed Command Paper submitted for pre-legislative scrutiny before being formally introduced. In other words, It is a detailed proposal the government expects to legislate within this parliamentary term, which ends in 2029.
The Bill's purpose is to replace leasehold as the default tenure for new flats in England and Wales with commonhold. Under commonhold, individual unit owners hold their property outright with no expiring term, no third-party freeholder and no ground rent, managing the building collectively through a commonhold association. Commonhold has lawfully existed since 2002 but has barely been used. The original framework could not handle the complexity of large or mixed-use buildings, so this Bill aims to rebuild it, and the intent to make it work this time is credible.
What is confirmed:
• Ban on most new leasehold flats, with commonhold becoming the default for new developments.
• Ground rents on existing leases capped at £250 per year, reducing to a peppercorn after 40 years. Late 2028 is the indicated target, subject to parliamentary approval.
• Forfeiture of long residential leases abolished, replaced with a court-controlled statutory enforcement process.
• Conversion threshold dropping from unanimous consent to 50% of qualifying leaseholders.
• A new sections framework for mixed-use buildings, separating commercial and residential governance and cost pools.
• Mandatory reserve funds under the commonhold structure.
What is not yet confirmed:
• No fixed commencement date for the ban on new leasehold flats. The Housing Minister acknowledged in April 2026 it may not happen within this Parliament.
• Most provisions require secondary legislation before they take effect.
• Exemptions from the leasehold ban remain subject to consultation, which closed on 24 April 2026.
What sections mean for mixed-use buildings
This is the mechanism the part of a Bill creates specifically for mixed-use buildings, where different parts of the same structure serve different purposes, house different occupier types and generate entirely different cost profiles.
Under sections, a mixed-use building can be divided so its commercial and residential portions operate with separate governance structures, separate cost pools and separate voting rights. The intent is to prevent cross-subsidy: commercial tenants paying for residential services they do not use, and vice versa. Historically this has been one of the most contentious management issues in mixed-use buildings.
In principle, logical. In practice, complex. Implementing sections requires precise mapping of every service, every shared cost, every area of building access and every maintenance responsibility across the whole structure. What sits in the commercial section? What is residential? What is genuinely shared? In a building with multiple tenancy types, varied lease structures and shared infrastructure, that exercise takes time and demands clean underlying data.
One thing property directors and CFOs need to understand clearly: sections do not reduce management complexity. They restructure it. The operational role of property managers does not shrink. What changes is who approves decisions, how costs are allocated, and how that allocation is evidenced when challenged.
What changes in practice: governance, reserves and enforcement
Budget governance
Under the reformed commonhold framework, budgets require formal member approval with mechanisms for challenge and revision. For experienced property managers, the mechanics of budget-setting are familiar. What changes is the standard of explainability expected at every stage. Cost allocations that have historically gone unchallenged are more likely to be questioned. The audit trail moves from a back-office record to a primary governance tool. Making the right decision is no longer sufficient. It needs to be traceable and defensible if challenged by unit owners, auditors or the First-tier Tribunal.
Reserve funds
Reserve funds become a formal structural requirement, not a best practice discipline. For mixed-use buildings this means structured conversations about long-term maintenance cycles and capital expenditure forecasting across commercial and residential sections separately. For CFOs, this carries balance sheet implications and raises questions about how reserve assets are held and governed in buildings with multiple section types.
Enforcement
With forfeiture abolished, enforcement relies on a formal legal process. The quality of the documentation supporting that process becomes decisive. Clean arrears histories, complete communication records, documented decision trails and auditable allocation logic are not just useful if a dispute escalates. They are the foundation of any enforcement action. Property directors who have relied on informal processes and fragmented records should treat this as a prompt to improve.
Who needs to act and what they should think about
Property managers
Professional management does not disappear under commonhold. The demands on property managers increase as governance and compliance requirements formalise. Property managers who already work with structured systems and clean data are well positioned. Those relying on informal processes face real transition risk.
CFOs and finance directors
The sections framework introduces requirements to separate cost pools and demonstrate that each section's contributions reflect actual benefit received. This demands financial granularity many portfolios do not currently maintain. Assessing whether existing systems can produce the data quality the new framework will require is a straightforward and important exercise to do now.
Directors and portfolio investors
Mixed-use buildings under the new framework will require more sophisticated governance, more transparent cost allocation and clearer documentation of management decisions. In transaction contexts, buildings with weak governance histories will carry more risk than they did before. The bar on what good asset management looks like has been raised.
Preparing is key
The teams that will find this transition hardest are not the ones that lack awareness of the Bill. They are the ones that chose to wait for a deadline before acting. Centralising lease data, structuring cost allocation, establishing auditable governance records and mapping shared costs in mixed-use buildings all take time. None of it happens quickly once a commencement order is published.
The Housing Minister has stated plainly that the leasehold system will end within five years. Cross-party support for reform removes the political uncertainty that has historically justified inaction. The question for commercial property teams is not whether to prepare. It is how far ahead they want to be when the changes land.
A note on operational readiness
The practical demands of the new framework are not abstract compliance exercises. Structured cost allocation, period-specific financial records, auditable governance trails, mandatory reserve fund management and CAM reconciliation across separated sections: these are the everyday requirements of managing a commercial portfolio well. The Bill simply raises the floor on what well looks like.
SOFT4Spaces manages the full lease lifecycle, automates billing and CAM cost distribution across units, maintains complete tenant records and generates auditable financial reports, all within a single system built on Microsoft Dynamics 365 Business Central. For mixed-use buildings where the sections framework demands precise mapping of services, costs and governance responsibilities, having that data centralised and reportable is the operational foundation the new regulatory environment will expect.
Frequently Asked Questions
Is the Commonhold and Leasehold Reform Bill law yet?
No. Published as draft legislation on 27 January 2026, it is currently undergoing pre-legislative scrutiny. Most provisions also require secondary legislation before they can take effect.
Does the Bill affect commercial property?
Yes. It explicitly applies to all property types except sole commercial premises. Any building mixing commercial and residential use is directly in scope.
What is a commonhold section?
A mechanism that allows different parts of a mixed-use building to operate with separate governance structures and cost pools, preventing cross-subsidy between commercial and residential occupiers.
When does the ban on new leasehold flats come into force?
No confirmed date. The government has stated it will only come into force once the reformed commonhold framework is fully operational. The overall reform programme is expected before 2029.
What should commercial property teams do now?
Assess the tenure structure and mixed-use composition of existing buildings. Review cost allocation processes and the quality of financial and governance records. Evaluate whether current systems can produce the data transparency the new framework will require. Start the groundwork now rather than waiting for a commencement date.
Related articles
What the 2026 UK Leasehold Reform Bill Means for Commercial Property Managers
The Commonhold and Leasehold Reform Bill has no confirmed start date, but for commercial property managers and directors of mixed-use buildings, that is not a reason to wait. The structural changes will take place either way, so it's essential to plan early.
Key Takeaways
• The Draft Commonhold and Leasehold Reform Bill was published on 27 January 2026. It is not yet law but is confirmed as a government priority for this Parliament.
• Mixed-use buildings face a complex transition, with new commonhold 'sections' introducing separate governance and cost pools for commercial and residential parts of the same building.
• The biggest near-term shift is not in tenure mechanics but in governance standards. Audit trails, budget approvals, reserve funds and cost allocation all face meaningfully higher scrutiny.
What the Bill actually is
The Draft Commonhold and Leasehold Reform Bill (UK) was published on 27 January 2026. It is a fully developed Command Paper submitted for pre-legislative scrutiny before being formally introduced. In other words, It is a detailed proposal the government expects to legislate within this parliamentary term, which ends in 2029.
The Bill's purpose is to replace leasehold as the default tenure for new flats in England and Wales with commonhold. Under commonhold, individual unit owners hold their property outright with no expiring term, no third-party freeholder and no ground rent, managing the building collectively through a commonhold association. Commonhold has lawfully existed since 2002 but has barely been used. The original framework could not handle the complexity of large or mixed-use buildings, so this Bill aims to rebuild it, and the intent to make it work this time is credible.
What is confirmed:
• Ban on most new leasehold flats, with commonhold becoming the default for new developments.
• Ground rents on existing leases capped at £250 per year, reducing to a peppercorn after 40 years. Late 2028 is the indicated target, subject to parliamentary approval.
• Forfeiture of long residential leases abolished, replaced with a court-controlled statutory enforcement process.
• Conversion threshold dropping from unanimous consent to 50% of qualifying leaseholders.
• A new sections framework for mixed-use buildings, separating commercial and residential governance and cost pools.
• Mandatory reserve funds under the commonhold structure.
What is not yet confirmed:
• No fixed commencement date for the ban on new leasehold flats. The Housing Minister acknowledged in April 2026 it may not happen within this Parliament.
• Most provisions require secondary legislation before they take effect.
• Exemptions from the leasehold ban remain subject to consultation, which closed on 24 April 2026.
What sections mean for mixed-use buildings
This is the mechanism the part of a Bill creates specifically for mixed-use buildings, where different parts of the same structure serve different purposes, house different occupier types and generate entirely different cost profiles.
Under sections, a mixed-use building can be divided so its commercial and residential portions operate with separate governance structures, separate cost pools and separate voting rights. The intent is to prevent cross-subsidy: commercial tenants paying for residential services they do not use, and vice versa. Historically this has been one of the most contentious management issues in mixed-use buildings.
In principle, logical. In practice, complex. Implementing sections requires precise mapping of every service, every shared cost, every area of building access and every maintenance responsibility across the whole structure. What sits in the commercial section? What is residential? What is genuinely shared? In a building with multiple tenancy types, varied lease structures and shared infrastructure, that exercise takes time and demands clean underlying data.
One thing property directors and CFOs need to understand clearly: sections do not reduce management complexity. They restructure it. The operational role of property managers does not shrink. What changes is who approves decisions, how costs are allocated, and how that allocation is evidenced when challenged.
What changes in practice: governance, reserves and enforcement
Budget governance
Under the reformed commonhold framework, budgets require formal member approval with mechanisms for challenge and revision. For experienced property managers, the mechanics of budget-setting are familiar. What changes is the standard of explainability expected at every stage. Cost allocations that have historically gone unchallenged are more likely to be questioned. The audit trail moves from a back-office record to a primary governance tool. Making the right decision is no longer sufficient. It needs to be traceable and defensible if challenged by unit owners, auditors or the First-tier Tribunal.
Reserve funds
Reserve funds become a formal structural requirement, not a best practice discipline. For mixed-use buildings this means structured conversations about long-term maintenance cycles and capital expenditure forecasting across commercial and residential sections separately. For CFOs, this carries balance sheet implications and raises questions about how reserve assets are held and governed in buildings with multiple section types.
Enforcement
With forfeiture abolished, enforcement relies on a formal legal process. The quality of the documentation supporting that process becomes decisive. Clean arrears histories, complete communication records, documented decision trails and auditable allocation logic are not just useful if a dispute escalates. They are the foundation of any enforcement action. Property directors who have relied on informal processes and fragmented records should treat this as a prompt to improve.
Who needs to act and what they should think about
Property managers
Professional management does not disappear under commonhold. The demands on property managers increase as governance and compliance requirements formalise. Property managers who already work with structured systems and clean data are well positioned. Those relying on informal processes face real transition risk.
CFOs and finance directors
The sections framework introduces requirements to separate cost pools and demonstrate that each section's contributions reflect actual benefit received. This demands financial granularity many portfolios do not currently maintain. Assessing whether existing systems can produce the data quality the new framework will require is a straightforward and important exercise to do now.
Directors and portfolio investors
Mixed-use buildings under the new framework will require more sophisticated governance, more transparent cost allocation and clearer documentation of management decisions. In transaction contexts, buildings with weak governance histories will carry more risk than they did before. The bar on what good asset management looks like has been raised.
Preparing is key
The teams that will find this transition hardest are not the ones that lack awareness of the Bill. They are the ones that chose to wait for a deadline before acting. Centralising lease data, structuring cost allocation, establishing auditable governance records and mapping shared costs in mixed-use buildings all take time. None of it happens quickly once a commencement order is published.
The Housing Minister has stated plainly that the leasehold system will end within five years. Cross-party support for reform removes the political uncertainty that has historically justified inaction. The question for commercial property teams is not whether to prepare. It is how far ahead they want to be when the changes land.
A note on operational readiness
The practical demands of the new framework are not abstract compliance exercises. Structured cost allocation, period-specific financial records, auditable governance trails, mandatory reserve fund management and CAM reconciliation across separated sections: these are the everyday requirements of managing a commercial portfolio well. The Bill simply raises the floor on what well looks like.
SOFT4Spaces manages the full lease lifecycle, automates billing and CAM cost distribution across units, maintains complete tenant records and generates auditable financial reports, all within a single system built on Microsoft Dynamics 365 Business Central. For mixed-use buildings where the sections framework demands precise mapping of services, costs and governance responsibilities, having that data centralised and reportable is the operational foundation the new regulatory environment will expect.
Frequently Asked Questions
Is the Commonhold and Leasehold Reform Bill law yet?
No. Published as draft legislation on 27 January 2026, it is currently undergoing pre-legislative scrutiny. Most provisions also require secondary legislation before they can take effect.
Does the Bill affect commercial property?
Yes. It explicitly applies to all property types except sole commercial premises. Any building mixing commercial and residential use is directly in scope.
What is a commonhold section?
A mechanism that allows different parts of a mixed-use building to operate with separate governance structures and cost pools, preventing cross-subsidy between commercial and residential occupiers.
When does the ban on new leasehold flats come into force?
No confirmed date. The government has stated it will only come into force once the reformed commonhold framework is fully operational. The overall reform programme is expected before 2029.
What should commercial property teams do now?
Assess the tenure structure and mixed-use composition of existing buildings. Review cost allocation processes and the quality of financial and governance records. Evaluate whether current systems can produce the data transparency the new framework will require. Start the groundwork now rather than waiting for a commencement date.