The Government’s proposed leasehold reforms risk creating “uncertainty and unintended consequences” for both leaseholders and freeholders, warns upmarket estate agency.

While the industry supports the Government’s ambition to “empower leaseholders fairly”, Knight Frank says there were “clear red flags” in the latest proposals for commonhold and ground rent reform.

Commonhold

One of its biggest concerns is that the proposals could allow leaseholders to convert buildings to commonhold following a 50% vote, potentially forcing non-participating owners into the new structure.

Jeremy Dharmasena (pictured), Head of Leasehold Reform & Litigation at Knight Frank, says some leaseholders could be “effectively bounced into commonhold”, despite having “little control” over the process or the future implications for the value and resale appeal of their property.

The proposed ground rent reforms were another area of concern. Dharmasena argues that reducing ground rents across 20 years rather than 40 risked being “overly punitive” to freeholders.

In addition, he warned there were inconsistencies between the proposed £250 ground rent cap and provisions already contained within the Leasehold and Freehold Reform Act 2024.

There is a misconception that commonhold will resolve all problems for leaseholders.”

He also highlighted proposals allowing tenants to defer development value during collective enfranchisement claims, which he claims could restrict future development potential and reduce freeholder asset values.

Dharmasena says: “There is a misconception that commonhold will resolve all problems for leaseholders, but in reality it won’t fix the underlying issue of the rising costs involved in running a building and its inevitable repairs.”

He also expressed doubts about plans to regulate property managers, questioning whether any new regime would be enforced in practice.