Leasehold Reform 2026: What Flat Owners Need to Know About Equity Release

What the Commonhold and Leasehold Reform Bill proposes

The draft Commonhold and Leasehold Reform Bill, confirmed in the May 2026 King's Speech, sets out a significant programme of change for flat owners in England and Wales. The key proposed measures include:

• Commonhold as the default: New flats will be sold on a commonhold basis rather than leasehold, ending the creation of new leasehold flat arrangements in most circumstances.
• Ground rent cap: Ground rents for existing leaseholders will be capped at £250 per year, falling to a peppercorn (effectively zero) after 40 years. This could provide immediate financial relief to leaseholders currently paying hundreds or thousands per year.
• Collective enfranchisement threshold reduced: The threshold for leaseholders to collectively purchase their freehold will fall from 100% to 50% agreement, making it significantly easier for flat owners to take control of their building.
• Forfeiture to be abolished: The threat of forfeiture — losing your home over a dispute with the freeholder — will be removed. This has been a source of acute anxiety for leaseholders and its abolition is widely welcomed.

The bill is not yet law, and parliamentary timetables being what they are, it may be 12 to 24 months before the provisions come into force. Leaseholders should not wait for the legislation before exploring their options — particularly if equity release is time-sensitive.

Why leasehold status affects equity release eligibility

Equity release lenders treat leasehold properties differently from freehold properties, and for good reason. The value and security of a leasehold flat is fundamentally linked to the remaining term of the lease. As the lease shortens, the property becomes harder to sell — and harder to mortgage or release equity against.

The specific barriers leaseholders encounter when applying for equity release include:

• Short lease: Most equity release lenders require a minimum unexpired lease term of 75 to 85 years at the end of the mortgage — not just at outset. If you are 70 and take a lifetime mortgage with a projected term of 20 years, the lease must have at least 95 to 105 years remaining today. Requirements vary by lender, which is one reason whole-of-market advice matters.
• High ground rent: Ground rents that exceed 0.1% of the property's value may trigger a "regulated" classification, complicating the mortgage. This is directly relevant to those paying ground rents in the hundreds of pounds per year on a property worth £300,000–£500,000.
• Freeholder consent: Some older leases contain clauses requiring freeholder consent to mortgage the property. While these are increasingly rare, they can create delays and complications in the equity release process.

Lease extension and equity release: the typical sequence

If your lease is too short to satisfy equity release lenders, the route forward is usually to extend the lease first, then apply for equity release. This is more straightforward than it might sound. Under the Leasehold Reform Act 1993, qualifying leaseholders have a statutory right to extend their lease by 90 years at a peppercorn ground rent, in exchange for a premium paid to the freeholder.

The premium varies depending on the unexpired term, the ground rent, and the property value. A specialist leasehold solicitor can advise on the likely cost. For many properties, the premium to extend is modest relative to the equity subsequently unlocked. Verity Home can connect you with solicitors experienced in leasehold matters as part of the overall advice process.

The key point is that a short lease is not necessarily a permanent bar to equity release — it is a step that needs to be taken first. Getting proper advice early means you understand what is required and can plan accordingly.

What the reform means for equity release applicants in practice

Once the ground rent cap comes into force — reducing ground rents to £250 per year and ultimately to a peppercorn — many of the ground-rent-related barriers to equity release will ease. Properties that currently fail lender criteria because of high ground rents may become eligible once the cap applies.

However, this is prospective legislation. Until the bill receives Royal Assent and the relevant provisions come into force, current leasehold terms remain in effect. A leaseholder with a £2,000 per year ground rent today cannot assume that will change by the time they need equity release.

The practical advice is: do not wait for the legislation if you need equity release now or in the near term. Instead, explore what is achievable under the current rules, with a specialist who understands leasehold complexity — and who has access to the full range of lenders, some of whom may have more accommodating criteria than others.

Getting the right advice on leasehold equity release

Leasehold equity release is more specialist than freehold equity release. Not all advisers are well-versed in the interaction between lease terms, ground rents, and lender criteria. Whole-of-market access is particularly important here: different lenders have different minimum lease term requirements, different ground rent thresholds, and different approaches to freeholder consent clauses. The right lender for your situation depends on your specific lease.

Verity Home advisers understand leasehold equity release — including the complexities around lease extension, ground rents, and freeholder relationships — and provide FCA-regulated advice on a whole-of-market basis, with no obligation to proceed.