By extension.lease – Experts in lease extensions and freehold purchase
The UK Government has today published the Draft Commonhold and Leasehold Reform Bill, including key measures on ground rents that have been widely reported in the media. However, while the announcement has been framed as a “change taking effect now,” the reality for leaseholders, freeholders, and property professionals is more complex — especially for leaseholders currently in the middle of lease extension negotiations.
You can read the Government’s draft Bill here. Draft Commonhold and Leasehold Reform Bill (gov.uk)
What Has Been Announced?
At its core, the draft Bill proposes:
- Capping ground rents on existing leases at £250 per year, with a further reduction to a peppercorn (nominal) after 40 years.
- Making it easier for leaseholders to convert to commonhold in the future.
- Banning leasehold for most new flats once fully implemented.
- Abolishing the threat of forfeiture for small breaches, replacing it with a fairer enforcement system.
These measures are intended to modernise an outdated leasehold system that affects millions of homes in England and Wales and to deliver on the Government’s housing manifesto commitments.
Important – The Change Is Draft Legislation
Although the media has described today’s news as if the reforms take effect from now, nothing has become law yet.
The Government has published the draft Bill for consultation and the usual parliamentary process. It will still need to:
- Undergo pre-legislative scrutiny and consultation with stakeholders.
- Pass through both Houses of Parliament.
- Be enacted and then implemented via secondary legislation.
The Government itself has suggested that implementation is unlikely until late 2028 at the earliest, meaning there are years of further legislative and regulatory development before any change becomes law.
Why This Matters to Clients in the Middle of a Lease Renewal
1. Waiting for the reforms to take effect may not save money in many cases
The draft Bill isn’t law, and even if it becomes law, it won’t apply for some years.
Lease extension valuations depend on the legal framework at the time notices are served and premiums are agreed, future reforms don’t automatically change current premiums unless the law actually changes, which is still uncertain.
2. Retrospective application remains contentious
One of the biggest points of debate has been whether ground rent caps and other reforms would apply retrospectively to contracts already in force.
Pension funds, institutional investors, and freehold owners are reported to be pushing back strongly, arguing that retrospective changes to contracts could damage confidence in UK property as an investment and could trigger compensation claims running into billions.
3. Legal challenges are possible
The ongoing wider leasehold reform agenda, including elements of the 2024 Leasehold and Freehold Reform Act has already been subject to judicial review and human rights challenges (particularly under Article 1 of Protocol 1 of the European Convention on Human Rights).
If parts of the reforms are perceived as mis-appropriation of contractual rights without compensation, further legal challenges could slow or alter how reforms apply.
So, Should You Wait Before Extending Your Lease?
The short answer is: not necessarily.
Waiting in the hope that these reforms will save money is risky because:
- The draft Bill may never be enacted in its current form.
- Even if enacted, it won’t take effect for several years.
- Retrospective effects are uncertain and likely to be challenged.
Leasehold valuations continue to be based on existing law until changed by Act of Parliament and confirmed in practice.
For most leaseholders, serving a notice and getting on with the extension under the current legislative regime remains the most secure and predictable course of action although there will be exceptions to this and we can advise you on the best course of action based on your circumstances.
What We’re Watching Next
We will closely monitor:
✔ Parliamentary debate and revisions to the draft Bill
✔ The consultation process and sector feedback
✔ Timelines set by Government for enactment and implementation
✔ Legal challenges that may affect retrospective application
If you’re part-way through your lease extension and want bespoke advice including what these reforms might mean for your specific timing and valuation position, please contact us and we’ll walk you through the options.
Extension.lease – Lease Extension Made Simple
Extension. Lease is a partnership of specialist Lease extension Solicitors and Lease Extension Surveyors working together to provide you with a seamless lease extension or freehold purchase experience. Covering London & Nationwide.
Contact us on 020 7388 0000 and speak with one of our friendly experts today or complete an enquiry online.
