The Draft Commonhold and Leasehold Reform Bill 2026 places commonhold firmly on the agenda for residential development in England and Wales. For developers and construction teams, this is no longer a distant policy issue. It is a live commercial and delivery issue that requires early planning. The Bill proposes to ban leasehold for most new flats once the reforms are brought into force and to make commonhold the default model instead. That direction of travel is clear, even if timing and transitional arrangements remain subject to consultation.

This guide focuses on the practical questions developers need to address now: how funding will work, how phased schemes can be protected and how exit strategies will need to change.

 

What the 2026 Draft Bill Changes

Under commonhold, each unit owner holds a freehold title to their flat, while shared parts are managed collectively through a Commonhold Association and governed by the commonhold community statement. The draft reforms are intended to make commonhold workable for larger and more complex schemes, including mixed-use developments, rather than just small residential blocks. They introduce clearer development rights, section-based governance, separate cost pools and stronger rules around budgets, reserves and management.

For developers, the key point is that the Bill is designed to preserve development rights during construction. It allows building work to continue after the Commonhold  Association has been set up and after the first units have been sold. That is a critical improvement on the existing regime. The use of sections is equally important. Residential and commercial parts of a scheme can be ringfenced with distinct governance arrangements and separate service charge responsibilities, reducing the risk of operational conflict across a mixed-use site.

 

Funding and Lender Conversations

One of the biggest commercial shifts is the loss of the freehold reversion as a funding and exit asset. In a traditional leasehold structure, the reversion can support senior lending and create value on disposal. In a commonhold model, value instead sits in individual freehold unit titles. Security is therefore more granular and tied to unit sales, rather than to a single retained interest.

Developers should start lender discussions early. Funders are likely to focus on how the Commonhold Community Statement allocates cost, preserves development rights, manages unsold units and controls decision-making during the build period. The legal structure will need to be explained in practical terms, with emphasis on enforceability, marketability and the effect on sales values. That conversation should begin long before the first disposal.

 

Phasing and Programme Protection

For phased developments, the Commonhold Community Statement becomes a core delivery document rather than a technical afterthought. It should reserve amendment rights where appropriate, protect construction access and prevent early unit owners from obstructing later phases. Where a scheme is divided into sections, completed areas can operate independently without acquiring governance rights over land that remains under active development. This will be especially important on larger urban and mixed-use projects.

 

Exit and Project Completion

Exit strategy also changes. Without a reversionary sale, the developer’s role ends when the final units are sold and any enhanced rights under the developer period fall away. The transition from developer control to owner-led governance should be mapped in advance, including the position of retained commercial units and any ongoing rights needed for later stages or adjoining land.

 

Developer Readiness Checklist

To summarise:

  • Review live and pipeline schemes to identify new flat developments likely to require commonhold once the leasehold ban takes effect.
  • Start lender discussions early and explain how security, value and cashflow will work in a unit-based freehold model rather than through a retained reversion.
  • Treat the commonhold community statement as a core delivery document, with clear provisions for development rights, construction access and unsold units.
  • Use sections and separate cost pools on phased or mixed-use schemes to avoid governance and service charge conflict.
  • Model budgets, reserve contributions and service charge apportionment early for lender diligence and purchaser scrutiny.
  • Plan the developer period and governance handover in advance, including board appointment rights and voting control.
  • Update sales, marketing and due diligence materials so buyers understand the practical differences between leasehold and commonhold.
  • Revisit exit assumptions early, as value is likely to depend on unit sales and handover strategy rather than a reversionary disposal.

 

How Ellisons Can Help

Ellisons advises development teams on how the draft reforms affect deal structure, project delivery and risk allocation. We help clients shape commonhold documentation so it reflects both the emerging legal framework and the commercial realities of modern development, from early planning through to completion and handover.