Written evidence submitted by the National Leasehold Campaign [CLR 256]
The National Leasehold Campaign was established in 2017 and has over 34K members in a community Facebook group. It does not hold charitable status, is supported by voluntary donations, and campaigns to abolish leasehold tenure and promote commonhold.
Disclaimer: The National Leasehold Campaign founders are not legally trained and have submitted this response on behalf of its members within the limits of their current knowledge and understanding of existing leasehold and commonhold law. Some of the points outlined in the response are also based upon anecdotal lived experiences of NLC members.
The final section exploring LAFRA2024 valuation impact upon Commonhold feasibility (3ii), was commissioned by us to evidence a crucial technical omission that we feel requires inclusion in the Commonhold & Leasehold Reform Bill.
RESPONSE
The proposed Commonhold and Leasehold Reform Bill is welcomed however it is noted that not all of the Law Commission recommendations in their Commonhold White Paper 2025 and Management of Housing Estates 2025 publications have been adopted as part of the legal framework.
(1) Strengthening leaseholder’s rights and bringing the feudal leasehold system to an end.
(i) Government proposal to cap ground rents
In 2023 the previous government launched a consultation offering five different options to manage retrospective Ground Rents- Modern Leasehold- Restricting Ground Rent for Existing Leases. We were surprised to see that “Peppercorn” was at the top of the list but encouraged that the SOS at the time recognised that existing leaseholders should be treated the same way as future leaseholders where ground rents are banned Leasehold Reform (Ground Rent) Act 2022. The outcome of that consultation was never formally published as the focus switched to ensuring the Leasehold and Freehold Reform Act 2024 passed as law before the 2024 general election.
The current Commonhold Bill seeks to redress that balance and has proposed retrospective changes to ground rents with a £250 cap and a sunset clause of 40 years (Guide to the Draft Commonhold & Leasehold Reform Bill, Part 3 Page 67 ).
This is disappointing especially as the outcome of the ground rent consultation is referred to in a recent government publication - “the consultation responses demonstrate that leaseholders overwhelmingly supported a rapid move to a peppercorn cap, while landlords
and investors argued that all the proposals would represent an unjust interference in their property rights and suggested wider negative impacts if these proposals were taken forward”Addressing unregulated and unaffordable ground rent- policy document- Page 6 Jan 2026.
We could have predicted the polarisation of the consultation results however it is clear from the Commonhold Bill that the current government has unfairly balanced the needs of freeholders against leaseholders. There is evidence to show that developers, encouraged by legal advice, monetised feudal ground rent legislation in the early 2000s by creating leases on new build flats and houses with onerous ground rent terms “Ground rents are set to become an attractive investment in a growing market” (Spotlight, Ground Rents 2012). This was achieved quickly providing an asset class marketable to freehold investors and yet this bill expects leaseholders to wait 40 years before achieving peppercorn.
Although the £250 cap was welcomed by a significant number of NLC members it only provides short to medium term relief and the 40 year wait to achieve peppercorn is not acceptable. The rationale behind the 40 year sunset clause can be found in a separate document (Addressing unregulated and unaffordable Ground Rent 2026 Page 9) and clearly shows the unfair bias against leaseholders. ANY financial cap on ground rents will inevitably delay conversion of existing leasehold blocks as enfranchisement costs are adversely affected by ground rents. This will create a two tier market and a barrier to ultimately making Commonhold the main tenure for flats in England and Wales .
What is equally concerning is that the Competition and Markets Authority in their investigation into ground rents stated that “ground rent is neither legally nor commercially necessary -Page 6 Item 13”.
We accept that this compromise is an attempt to prevent any further legal challenges from investors but we urge government to reconsider and be bold enough to retrospectively mandate peppercorn ground rents via the Commonhold and Leasehold Bill, otherwise the policy objective to bring leasehold tenure to an end will not be achieved in the lifetime of many leaseholders who will continue to be disadvantaged.
(ii) Forfeiture
We feel that the proposed lease enforcement scheme is a fairer alternative to the current forfeiture system however urge government to ensure that the system to enforce and collect owed monies is also controlled in the new scheme. We have seen evidence in NLC of examples of unnecessary aggressive and threatening demands from solicitors with unachievable deadlines and escalating legal fees (Journalism News Network 2026).
(iii) Privately managed Housing Estates
The Bill repeals sections 121 and 122 of the Law of Property Act 1925, and also for other rentcharges that can still be created under section 2 of the Rentcharges Act 1977, to prevent landlords using excessive measures to recoup unpaid fees eg creating leases on freehold homes (Guide to the Draft Commonhold & Leasehold Reform Bill- Part 5, 2026). This is welcome however does not go far enough and we feel the omission of a mechanism to allow existing “private freehold estates” to take back control of their common parts such as green spaces and parks is concerning.
It is a missed opportunity to not retrospectively assist freehold house owners to benefit from similar proposals put forward for existing flat leaseholders. This omission will create a dichotomy on estates that have both houses and flats, whereby the flats could convert to commonhold but the houses remain subject to escalating estate maintenance charges controlled by managing agents. The Law Commission has previously set out a potential framework to allow owners of freehold houses take back control of their estate and this model could be incorporated into the bill (Management of Housing Estates 2025).
Including a mechanism for freehold houses to create a commonhold estate association or similar would enhance the bill and prevent the need to create a future piece of legislation. There can also be problems when the estate is not maintained to an appropriate standard, and disgruntled residents may then look to the local authority to help them out. A 2015 report found that: “local authorities said that they encounter problems as schemes age and management arrangements lapse and residents look to the local authority for repairs for which they are not technically responsible.” Far from Privatopia: Private Residential Estates in England and Wales (Please note that NLC members on private estates would ultimately prefer complete adoption of the common parts by local authority which appears to be outside of the scope of this Bill).
It is also currently unclear as to the scope of a Commonhold Association in relation to any wider shared common areas outside of the block, for example parking spaces external to the building. NLC has been given evidence of one freeholder claiming the Bill does not cover a resident's parking space and ground rent will continue to be collected under the lease terms even if the Bill becomes law. (NB the NLC member has requested anonymity at this point however evidence proof can be provided outside of this written submission)
(2) Making commonhold work and enabling the conversion of existing blocks
Overall the draft bill does offer conversion to commonhold as an achievable option within a flexible, tailored structure, however we do have some questions that would clarify how collective decision making in a commonhold association could be supported.
(i) Fair Collective Decision Making
The Bill states that all commonholders and non-consenting leaseholders will be entitled to vote on any decisions the Commonhold Association board put forward and that the threshold to pass a board motion is increased from 50% to 75% (Guide to the Draft Commonhold and Leasehold Reform Bill, Page 26). Although we recognise this is an attempt at providing autonomy in a commonhold structure we believe it could also lead to extensive delays and increased costs especially if a managing agent is appointed. The task of preparing voting paperwork, communicating/distribution of the paperwork and managing the voting process across such a large % of residents will be time consuming and costly. It may work for buildings with a few units but will be unmanageable for those with hundreds of units or multiple sections creating a threat to the commonhold structure. An alternative would be for the board to give residents an opportunity to view and comment on proposals prior to a vote restricted to directors with a majority board member vote carrying. Residents would have the right to challenge any decision as set out in the Bill via minority protection rules (Guide to the draft Commonhold and Leasehold Bill, Page 26)
(ii) Subletting of Commonhold units
The bill clearly sets out the responsibility of the Commonhold Association via a community statement and articles of association that will replace lease terms for converted blocks. It also specifies that holiday lets will be restricted but short term lets and emergency accommodation will not be similarly controlled (Guide to the Draft Commonhold & Leasehold Bill, Page 29, FAQ) .
Evidence from NLC members shows that in some cases renting out of leasehold units causes disruption to resident leaseholders due to unsocial behaviour eg AirBnB. Although we recognise that emergency accommodation is necessary in communities, we are concerned that the bill will not restrict such use of the units under commonhold legislation. It would be better to state clearly that a commonhold association has the right to vote upon inclusion/exclusion of such terms in the articles of association or in the local rules.
It would also benefit the bill to specify that the Commonhold Association has the power to approve or disapprove a short term let and require a rolling review of that arrangement every 6-12 months.
(iii) Annual Budget and Sinking Fund
The bill sets out the requirement for an annual budget and a sinking fund which is sensible. It also requires the creation of a commonhold committee made up of resident directors, to carry out “reserve fund studies by an appropriately qualified person Guide to the Commonhold & Leasehold Reform Bill, Page 39”.
NLC members who have experience of RMC/RTM have reported incidences of board members stepping outside of their remit regarding audit of funds. This has caused conflict in some cases and a breakdown of the RMC/RTM in others. It would be advisable for this bill to specify that the appropriately qualified person must be an external independent appointment paid for out of commonhold funds. This would ensure total transparency and prevent “in house” review which anecdotal evidence shows can be open to abuse.
(iv) Commonhold Residents vs Non consenting Leaseholders
The bill explores the scenario of a leasehold block converting to commonhold whereby the 50% threshold is met but not all leaseholders decide to convert (non consenting) (Guide to the Draft Commonhold & Leasehold Reform Bill, Page 50).
It is clear that the non consenting leaseholders will be subject to the new Commonhold Association articles and local rules, and will contribute to the commonhold sinking and maintenance funds. It is also clear that the existing leases will require modification to remove the lease length as resale can only be as a commonhold unit (Guide to the Draft Commonhold & Leasehold Reform Bill, Page 54).
It is not very clear if other lease terms will also be removed such as a fee to the original freeholder to change anything within the unit. This may create a conflict whereby the commonhold committee has given the non-consenting tenant permission for an alteration but the freeholder/owner refuses. It may be we have not fully grasped the legal details in the bill proposals however our members will need an explanation that helps them understand which part of their lease remains if they chose to be non consenting.
It is also unclear at the moment who will be liable to pay for the deed of variation required in the non consenting leases. “Through measures in the Bill, the leases of non-consenting leaseholders will be amended so that they align more closely with the CCS- Page 52”- as the freeholder is still the owner of the flat, could they charge the leaseholder for amendments or will the Commonhold committee have to foot the bill?
(v) Exemptions
It is encouraging to see that “Event Fees” have been removed in the Commonhold Legal Framework, however we are disappointed that retirement properties are exempt (Guide to the Draft Commonhold & Leasehold Reform Bill, Page 27 ). Evidence from NLC members describes the horrendous financial burden placed upon the relatives of deceased leaseholders when attempting to sell the retirement property left to them in a will (Why are Retirement Flats not selling -Home Owners Alliance ).
The main causes of this are reported as high, escalating maintenance fees and onerous ground rents. Whilst the proposed £250 cap and stricter control over managing agents may
help to some degree, the event fee demanded at the point of sale (reported anywhere between 1-30% of sale price) could negate those benefits.
This is because retirement home agreements usually require relatives to continue to pay the management fee and ground rent after the resident has passed. These debts accrue quickly and even if a sale is achieved the equity may not cover the debt, causing further hardship. Abolishing event fees for retirement properties would enhance this bill and redress the inequalities in the retirement sector.
(vi) Training & Support for Commonhold Directors and Unit Owners
If commonhold is to succeed as the long‑term replacement for leasehold, Government cannot focus solely on preparing professionals, managing agents or developers for this change. Unit owners are the backbone of a commonhold association, and without giving them the knowledge, confidence, and skills to participate effectively, the model will struggle to function as intended.
(3) Implementation and Final Questions
(i) Timelines
We recognise that Parliamentary procedures govern the process of bringing laws into fact and that 2028 has been muted as a potential deadline for this Bill to be activated. NLC members have waited many years for meaningful change and are bound by extortionate leasehold costs in the meantime. We hope that this Bill can be expedited through the system and the deadline brought forward.
Our concerns re the 40 year sunset clause currently in the Bill are outlined above and we reiterate that it is not acceptable to NLC members as it delays the Policy Objectives of the Bill to “bring the feudal leasehold system to an end” (Call for Evidence- Terms of Reference). The ground rent scandal came to light in 2017, leaseholders do not need another 40 years from the Bill receiving royal assent to achieve peppercorn.
(ii) How would the provisions in the draft Bill interact with LAFRA2024
One of the central aims of the Commonhold and Leasehold Reform Bill is to enable existing leaseholders to convert their buildings to commonhold. However, this conversion requires a two-stage process: first, leaseholders must enfranchise their building; only then can they convert it to commonhold. While the current Bill makes this second stage easier, it does not adequately reduce the cost of the first. As a result, most existing leaseholders will remain unable to enfranchise even if all existing provisions of the Leasehold and Freehold Reform Act (LAFRA) are commenced. Analysis of enfranchisement costs shows that two additional reforms—removal of development value at enfranchisement (as recommended by the Law
Commission but omitted from LAFRA) and statutory protection against future reductions in deferment and capitalisation rates (refining the Law Commission recommendation in LAFRA) are essential in ensuring that most existing leaseholders will have the ability to enfranchise. Without these measures, the Bill will have the unintended consequence of creating a two-tier housing market in which most existing leaseholders will be trapped, by the high barriers to enfranchisement, in the increasingly unfavourable legacy leasehold segment of the housing market.
Development value
Where it (theoretically) exists development value is usually the single largest obstacle preventing leaseholders from acquiring their freehold. Because of the Town and Country Planning (General Permitted Development) (England) (Amendment) (No. 2) Order 2020, it is not unreasonable to assume that most apartment buildings constructed between 1948 and 2018 now benefit from permitted development rights allowing the addition of one or two extra storeys. Consequently, the theoretical possibility of adding floors exists for most leasehold buildings1. This theoretical possibility is monetised as “development value,” and freeholders may demand that leaseholders compensate them for this hypothetical opportunity at the point of enfranchisement.
The impact is severe. Case studies2 and modelling demonstrate that development value can increase the cost of enfranchisement for an individual leaseholder by up to ten-fold. One representative model, using typical lease length, property value, and ground rent to illustrate the effect of development value on the ‘average leaseholder’ shows the premium payable to enfranchise could rise from £8,000 to £80,000 solely due to development value3. This analysis also illustrates that even if all the aspects of LAFRA designed to make enfranchisement cheaper were commenced, because of the increase in development value since 2020, the overall cost of enfranchisement is still likely to rise significantly for most leaseholders.
The Law Commission has already proposed a simple and balanced solution: leaseholders should be allowed to accept a restriction on future development in exchange for not paying development value upfront. If they later wish to develop the building, the restriction can be lifted through negotiation or automatically expires after ten years. This
1 According to the English Housing Survey 2014-15 63% of dwellings in England were built between 1945-2014. While some of these buildings will not have development value (because of exceptions to the regulation), some buildings built before or after this date will also have development value. Furthermore, even when development value is practically impossible to take advantage of, because of restrictions in leases, the theoretical possibility of development value can still be included in enfranchisement costs, even if discounted for by these practical limitations.
2 See for example the case reported in the debate on LAFRA in the House of Lords- here.
3 See Freeholders' development rights stand in the way of leaseholder enfranchisement - and the future of commonhold - Leasehold Knowledge Partnership.
approach protects the legitimate interests of both parties while removing the single greatest barrier to enfranchisement. Without adopting this recommendation into the present Bill, most buildings will remain financially unable to undertake step one of the transitions to commonhold.
It is important to note that following the Law Commission’s recommendation may result in an increase not a decrease in actual construction. This is because the current leasehold system often prevents development in practice even as it has become easier for freeholders to claim compensation for ‘theoretical’ development value during enfranchisement. In many leasehold properties, with potentially multiple stakeholders (leasehold owners, intermediate leaseholders, RTM or RMC entities), it may be difficult for the freeholder to build any more units in practice- as this would require deeds of variation from multiple/all leaseholders. Leaseholders, fearing that they may ultimately become liable for construction defects, are likely to be risk averse. Conversely, once a building has become commonhold the simpler ownership structure should make the negotiation of new development easier- because there are fewer stakeholders involved and the misalignment of interest between the freeholder and existing leaseholders has disappeared. The government should consider the rules that apply if a commonhold site develops upwards in terms of both the protections to the existing unit owners and also the split of the profit. Models in Sweden and Canada give examples of how this system might work.
Capitalisation and deferment rates
The second essential reform concerns the deferment and capitalisation rates used in statutory valuation. These rates determine the present value of both the freeholder’s future reversionary interest (via the deferment rate) and future ground rent income (via the capitalisation rate). Both rates have historically been set at levels that balance leaseholder affordability with freeholder entitlement: approximately 4.75%/5.0% for the deferment rate for leasehold houses and flats respectively, and 6.0% for capitalisation. Once the relevant section of LAFRA is commenced, these rates will be set by the Secretary of State. Freeholders are now lobbying for a substantial reduction in both rates—particularly for a deferment rate of 3.5%4.
Analysis shows that even modest reductions in these rates would significantly increase enfranchisement costs. The premium payable is dominated, for most leaseholders, by the
4 See the evidence provided in the second sitting of LAFRA- here
present value of the reversion and the term value, not by marriage value or high ground rent escalation – which only affect a minority of leaseholders5.
Even the commencement of the current draft Bill’s cap on ground rent does not necessarily result in lower premiums payable for leaseholders considering continued uncertainty over these rates. A simple example demonstrates this effect. The median leaseholder (who pays ground rent) pays a ground rent of £1206 and, the median lease has approximately 112 years left it7. Given the current capitalisation rate of 6% the component of the premium payable due to ground rents would be, very approximately, £2,000. Conversely, if ground rents were capped for 40 years, after which they were ceased to have any financial value, but the capitalisation rate was set at 3.5% the component of the premium payable due to ground rents would be, very approximately, £2,560- so almost 30% higher. This is because lower rates give greater weight to future payments, the premium payable becomes higher under lower capitalisation rates, even though the reform appears beneficial on its face.
Accordingly, the Bill must incorporate an amendment to LAFRA requiring that deferment and capitalisation rates be set no lower than their current values. Ministers should be empowered to prescribe these rates by secondary legislation, but only within a framework that guarantees they cannot fall below the case-law defaults. If either the deferment or capitalisation rates fall sufficiently, it is likely to make the enfranchisement process more expensive for a majority of leaseholders.
If these two critical reforms—abolition of development value at enfranchisement and the statutory maintenance of existing valuation rates—are omitted from the Bill, the majority of current leaseholders will remain financially unable to collectively enfranchise. As a consequence, they will be unable to convert to commonhold, perpetuating the inequities of the leasehold system even as the government seeks to abolish it for new housing. By contrast, incorporating these reforms would align the Bill with the government’s original commitment to enact the remaining Law Commission recommendations and ensure that the transition to commonhold is achievable for the people already living in leasehold homes. Without these measures, the promise of a fair and accessible route to commonhold will remain out of reach for most of the households the Bill intends to help.
RESPONSE ENDS
March 2026
5 See: Ending marriage value would benefit short-lease owners. But leaseholders with 80-150 years left could face a considerable hike in extension costs over the current unreformed regime - Leasehold Knowledge Partnership
6 See: English Housing Survey 2023 to 2024: leasehold experience fact sheet - GOV.UK
7 See: LeaseholdandFreeholdReformBillImpactAssessment.pdf p.127