Leasehold Reforms Set to Transform Homeownership 

The UK government has announced significant reforms to the leasehold system, aiming to provide homeowners with more control and eliminate unfair practices. These changes are set to transform property ownership in England and Wales. 

Key Reforms 

• Ban on New Leasehold Flats: Future residential developments will adopt the commonhold system, allowing homeowners to own their individual units outright and collectively manage shared areas. This move addresses long-standing issues associated with leasehold arrangements.  

• Enhanced Rights for Leaseholders: The new legislation will empower leaseholders with greater transparency in service charges and simplify the process for taking over building management. This aims to rectify the imbalance of power between leaseholders and freeholders.  

• Simplified Path to Freehold Ownership: The reforms will make it easier and more affordable for leaseholders to purchase the freehold of their properties, promoting fairer valuation processes and extended lease terms.  

Understanding Commonhold Tenure 

Commonhold is a form of property ownership where individuals own their specific unit outright, and collectively, all unit owners manage and maintain shared areas through a commonhold association. This system contrasts with leasehold arrangements, offering homeowners perpetual ownership in the same way as a freehold title does, without the complexities of lease agreements.
 

Implications for Homeowners 

These reforms are poised to make homeownership more secure and financially predictable by removing unjust costs and granting leaseholders greater autonomy. The transition to commonhold is expected to resolve issues like escalating ground rents and limited control over property management.  

Sarah Gillbe, Senior Residential Property Consultant, describes the reforms as a significant step forward:

“This is a landmark moment for leaseholders. Many have faced escalating costs and limited control over their properties—this reform provides a pathway to real homeownership.” 

However, the shift to commonhold presents challenges, particularly concerning the transition of existing leasehold properties and the readiness of stakeholders to adopt this new system. Sarah Gillbe notes:

“The move to commonhold is a positive step, but practical challenges remain. Many existing leaseholders will want clarity on how these changes apply to them and what support will be available. It will also be important to see how mortgage lenders react to the reforms – currently most high street lenders will not lend on commonhold units.” 

Challenges and Considerations 

While the proposed reforms are widely welcomed, several practical challenges need attention: 

• Transition of Existing Leasehold Properties: Clarification is needed on how current leasehold buildings can convert to commonhold and the processes involved. This is likely to be a complex area requiring specialist legal advice.

• Regulation of Managing Agents: Ensuring that managing agents operate fairly under the new system is crucial to prevent potential exploitation and reduce the increasingly high fees charged by some.

• Impact on Housing Supply: Assessing how developers will respond to these changes and the potential effects on future housing availability is essential.  

These details are expected to become clearer once the government publishes its draft reform bill for consultation. 

Next Steps 

The proposed reforms signify a major shift in property law but require legislative approval before implementation. Homeowners and leaseholders should stay informed as the bill progresses and consider seeking legal advice to understand how these changes could affect them. 

If you have any questions about leasehold reform and what it means for you, get in touch with our team.