The landscape of residential property in England and Wales has undergone a tectonic shift with the introduction of the Draft Commonhold and Leasehold Reform Bill in early 2026. This landmark legislation aims to fulfill the long-standing promise of ending the "feudal" leasehold system by making commonhold the default tenure for all new-build flats. For mortgage advisors, this represents the most significant change in property law in a generation. No longer a niche interest, commonhold is being thrust into the mainstream, requiring a complete recalibration of how we assess property risk and advise clients.

Understanding the New Default: What is Commonhold?

At its core, commonhold is a form of freehold ownership designed specifically for multi-unit buildings. Unlike leasehold, where a tenant owns a "right to occupy" for a fixed term (the lease), a commonhold unit owner owns their flat indefinitely. There is no landlord, no expiring term, and—crucially—no ground rent. Instead, the shared parts of the building, such as the roof, hallways, and structural walls, are owned and managed by a Commonhold Association. This is a company limited by guarantee where every unit owner is a member with a democratic vote. This shift removes the inherent conflict of interest between a third-party freeholder and the residents who actually live in the building.

For advisors, the primary challenge is explaining this "Community Statement" structure to clients who are used to the familiar terms of a lease. The Commonhold Community Statement (CCS) replaces the lease as the "rulebook" for the building. It is a standardized document, which in theory makes the conveyancing process much faster and more transparent. When advising clients, those with a background from a cemap mortgage advisor course must highlight that while the ownership is more secure, the responsibilities are more direct. There is no landlord to step in if the building falls into disrepair; the owners must manage the budgets and reserve funds themselves, making the financial health of the Commonhold Association a key factor in mortgageability.

Navigating the Lender Acceptance Hurdle

Historically, the biggest barrier to commonhold has been lender reluctance. Banks were wary of the "solvency risk"—what happens to the building's management if the Commonhold Association runs out of money or if a few owners stop paying their service charges? Under the old 2002 rules, there was no "forfeiture" mechanism, meaning the association couldn't easily reclaim a unit to pay off debts, which made lenders nervous about their security. The 2026 reforms specifically address these concerns by introducing enhanced protections for mortgagees, including mandatory reserve funds and "step-in" rights that allow lenders to appoint a receiver or a manager if the association fails.

When advising a client post-2026, you must verify that their chosen lender has updated their Part 2 Handbook instructions to reflect the new commonhold framework. Many mainstream lenders have now integrated commonhold into their standard criteria, but some smaller building societies may still require a bespoke report from a solicitor.

Advising on Leasehold-to-Commonhold Conversions

The 2026 Act doesn't just mandate commonhold for new builds; it also makes it significantly easier for the existing 5 million leaseholders to convert their homes. The previous requirement for 100% consent from all residents was an impossible barrier. The new threshold has been reduced to 50% of qualifying tenants, mirroring the rules for collective enfranchisement. This means advisors will increasingly encounter clients who are in the middle of a conversion process. This can be a complex period for a mortgage, as the title at the Land Registry is physically changing from a leasehold to a commonhold "unit" title.

During these conversions, advisors must manage the timing of any remortgage or further advance. Lenders will need to be satisfied that the new Commonhold Association has a robust professional management structure in place.

The Financial Implications: Service Charges and Reserve Funds

One of the most attractive features of the 2026 reform is the "transparency mandate." Under commonhold, service charges are replaced by "commonhold contributions." Unlike variable service charges, which often led to litigation in the leasehold system, commonhold budgets must be voted on annually by the unit owners. Furthermore, the 2026 Bill makes reserve funds—money set aside for future major works like roof repairs—mandatory. This is a massive shift from the leasehold world, where "sinking funds" were often neglected, leading to "special levy" bills that could bankrupt a homeowner.

For mortgage advisors, this means a shift in how we assess affordability. When looking at a commonhold unit, we aren't just looking at the client's salary; we are looking at the "Unit Information Certificate" (UIC) to ensure the association is well-funded. A high monthly contribution might actually be a sign of a "healthier" mortgage security if it means there is a significant reserve fund waiting for future repairs.

Future-Proofing the Client's Investment

As we look toward the late 2020s, the "marketability" of leasehold properties with ground rents is expected to decline as commonhold becomes the gold standard for flat ownership. The 2026 cap on existing ground rents at £250 is a relief for many, but it still leaves them with a diminishing asset as the lease term counts down. Commonhold offers a "future-proof" solution. When you advise a client to choose a commonhold unit over a remaining leasehold option, you are essentially advising them on a "perpetual" asset that will never require a costly lease extension or an enfranchisement claim.