Government to bring “feudal” leasehold to an end, reinvigorate use of commonhold
The Government has issued a white paper setting out its plans to ban the sale of new leasehold flats and make commonhold the default tenure in England and Wales.
The Ministry of Housing, Communities and Local Government said that unlike leasehold ownership, where third-party landlords own buildings and make decisions on behalf of homeowners, commonhold affords homeowners the right to an ownership stake in their buildings from the outset and will greater control over how their home is managed and the bills they pay.
Housing and Planning Minister Matthew Pennycook said: “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.
“These reforms mark the beginning of the end for a system that has seen millions of homeowners subject to unfair practices and unreasonable costs at the hands of their landlords and build on our Plan for Change commitments to drive up living standards and create a housing system fit for the twenty-first century.”
Changes set out in the Commonhold White Paper: The proposed new commonhold model for homeownership in England and Wales include:
- new rules that will enable commonhold to work for all types of developments, including mixed-use buildings and allowing shared ownership homes within a commonhold;
- greater flexibility over development rights, “helping developers build with confidence and maintaining safeguards for the consumer”;
- giving mortgage lenders greater assurance with new measures to protect their stake in buildings and protect the solvency of commonholds – such as mandatory public liability insurance and reserve funds and greater oversight by commonhold unit owners to keep costs affordable;
- strengthening the management of commonholds, with new rules around appointing directors, clear standards for repairs, and mandating use of reserve funds; and
- providing an enhanced offer for homeowners – including requiring greater opportunities for democracy in agreeing the annual budget, clarifying how owners may change “local rules” over how a building is run and new protections for when things go wrong.
A new Code of Practice will provide guidance on apportionment of costs and the Government will also launch a consultation to ban new leasehold flats later this year.
A draft Leasehold and Commonhold Reform Bill will be published later this year setting out the legal framework for how reformed commonhold will work.
Gary Ekpenyoung, real estates partner at law firm Shakespeare Martineau, said the Government’s move was “not shocking, as this has been the intention of consecutive governments and will mark a radical change to property ownership with a view to addressing longstanding criticisms of the leasehold system”.
He added: “This is another step aimed at redressing some of the balance between owners and occupiers, and comes on the back of increased leaseholder and tenant protection contained in the Leasehold and Freehold Reform Act 2024 and the Renters Rights Bill that is currently progressing through parliament.”
But Ekpenyoung suggested that commonhold comes with its own challenges, with decisions often slower because it relies on the cooperation and participation of its members.
“This means repairs and maintenance can be more irregular and tenants can find themselves left in unsuitable accommodation for longer. Although the full framework is yet to be revealed, developers and landlords will be concerned for the commonhold future, which may not be as beneficial for tenants as many think. Adapting to this new landscape will require landlords to reassess their roles and strategies within the property market.”
Harry Rodd
