The Government has promised to completely overhaul the leasehold system including a ban on new leasehold flats, the second shot at such reforms since Michael Gove’s promised overhaul last year.

A Commonhold White Paper just out also contains pledges to allow homeowners to take a stake in their buildings from day one and abolish ground rent.

The plans build on The Leasehold and Freehold Reform Act 2024, which was one of the only laws that made it through at the last minute under the Conservative government before the General Election was called.

Under the Act, a ban on leaseholds for new houses became law, as well as extending the standard lease term to 990 years.  But a cap on ground rent was left out.

Reinvigorated

Now, ministers say commonhold will be “reinvigorated”, and made the default tenure under the new bill.

They say commonhold will make the whole system much fairer, and less open to abuse by ‘unscrupulous freeholders’.

We will ensure that it is homeowners, not third-party landlords, who will own the buildings they live in.”

Housing Minister Matthew Pennycook (main picture) says: “This government promised not only to provide immediate relief to leaseholders suffering now, but to do what is necessary to bring the feudal leasehold system to an end – and that is precisely what we are doing.

“By taking decisive steps to reinvigorate commonhold and make it the default tenure, we will ensure that it is homeowners, not third-party landlords, who will own the buildings they live in and have a greater say in how their home is managed and the bills they pay.”

Industry reaction

Timothy Douglas, Head of Policy and Campaigns at Propertymark

“Propertymark has long campaigned for changes to make it cheaper and easier to buy, sell and rent leasehold property,” he says.

“We know that there are complications and additional costs with extending leases and property with an escalating ground rent struggles to sell, so commonhold offers an opportunity to tackle these issues.

“With 42 per cent of Propertymark member agents favouring abolishing the leasehold system altogether, it’s clear to see there is frustration with the current system.”

Ian Fletcher, Policy Director at the British Property Federation

“We are broadly supportive of the introduction of a commonhold system, but there are a few areas where Government must tread carefully.

“First, large mixed-use developments are complex to manage and maintain so commonholders will need access to training. In addition, investors will need assurances that commercial areas or ‘sections’ are properly managed,” he says.

“Second, we need a clear process for transitioning from leasehold to commonhold, which will require alignment between lenders, conveyancers, insurers and agents. This is likely to take time and in the interim there is a risk that the value of leasehold homes are negatively impacted, which will not help owners or liquidity in the housing market.

“There also is a question around how many people will volunteer to take on the management of buildings. This can be stressful and time-consuming and the reality is some people are happy to rely on a professional freeholder.”

Scott Goldstein, Partner at law firm Payne Hicks Beach

“Commonhold has never caught on. Today’s announcement is the latest in a series of initiatives introduced since 2002 to try to spread the use of commonhold. The concern is to make sure that the system is ready to cope.

“Lenders must be encouraged to give mortgages to purchase flats held on commonhold. There must be robust financial controls in place to ensure commonhold blocks have the resources they need to manage their properties,” he says.

“Finally, as commonhold blocks are always run by property owners, many more of us will be involved in property management.

Linz Darlington, MD of lease extension specialists Homehold

“Commonhold tenure was first introduced in 2002 but never took off. As a tenure Commonhold is similar to Tenements in Scotland, the Strata title in Australia, and the Condo in the US. It involves flat owners owning and managing their building together.

“A cornerstone in the reinvigoration of the commonhold tenure is to ban leasehold on flats – but critically this only affects new build properties, not existing flats.

“While a move to commonhold is a genuinely laudable aim it will create a “two-tier” system of flats in the UK. New properties under the new style of ownership and management will be preferred by buyers to existing leasehold properties,” he says.

Mark Chick, director of ALEP and a Partner at Bishop & Sewell LLP

“Whilst the announcement signals the proposed moves to amend commonhold (as previously announced by government), there is a great deal of work to be done to ensure that commonhold is made ‘fit for purpose’,” he says.

“Today’s announcement signals a proposal that once commonhold has been introduced that the sale of new leasehold flats will be banned. Such a position will of course only be possible if and when all of the necessary reforms to the commonhold system have taken place.

“We would urge government to be realistic in managing the expectation of the public as to when this is likely to be as, in our estimation, this is likely to take some significant time.”

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