New leasehold flats are set to be banned under government plans to make commonhold the default tenure, with homeowners expected to have greater control over their properties.
Housing minister Matthew Pennycook said the reforms “mark the beginning of the end” for the “feudal” leasehold system, which subjects homeowners to “unfair practices and unreasonable costs”.
Under the existing system, third-party landlords can own a building’s lease and therefore make decisions on behalf of homeowners.
The government has proposed to bring the leaseholds system to an end, in line with its manifesto commitment, and give homeowners more control over how their buildings are run.
Homeowners will not have to pay additional costs such as ground rent under the proposed reforms.
A Commonhold White Paper published today states commonhold will be “reinvigorated” through a new legal framework and the sale of new leasehold flats will be prohibited.
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.”
A draft Leasehold and Commonhold Reform Bill, which will include the detail of how reformed commonhold will work, will be published later this year, the Ministry of Housing, Communities and Local Government has said.
The National Leasehold Campaign (NLC) has welcomed the decisive steps being taken by the government towards making Commonhold the default tenure for flats.
It is something the NLC has longed campaigned for. This announcement demonstrates a clear commitment to delivering on their manifesto promise and represents a significant shift towards a fairer and more transparent system of property ownership which is more consistent with the rest of the world, according to the NLC.
NLC founder and spokeswoman Katie Kendrick, a children’s nurse from Ellesmere Port, said: “There are over 5 million leaseholders in England and Wales, many of whom live in flats and apartments.
“Today’s White Paper is a significant step forward and is the beginning of the end for the feudal leasehold system. While focusing on preventing future leasehold abuses is crucial, it’s equally vital to address the plight of existing leaseholders currently bound by the inequitable leasehold system. Commonhold conversion mechanisms are essential to offer an escape route for those trapped, alongside tackling issues like existing ground rents, reforming the valuation process for enfranchisement and regulating managing agents. Ensuring these existing issues are resolved alongside the move to Commonhold will ensure a fairer and more equitable housing landscape for all flat owners.”
Cath Williams, a retired university lecturer from Liverpool, and co-founder of the NLC, remarked: “This is great news for leaseholders. A move to Commonhold fundamentally changes the nature of homeownership – one where every flat or unit is owned by two parties (the landlord and the tenant) whose interests often don’t align; to one where each unit is owned by one party – the unit owner. The shift from a ‘them and us’ mindset to an ‘us and ourselves’ is exciting. For too long leaseholders have been burdened with escalating ground rents and opaque service charges, leaving them feeling trapped and disempowered. Making Commonhold the default will empower flat owners, giving them greater control over their building and their finances, fostering a stronger sense of community and long-term security. This is a really positive move that promises to reshape the landscape of flat ownership in the UK for the better”.
Jo Darbyshire, the MD of a pensions administration company, and co-founder of the NLC, added: “It does feel like the leasehold gravy train is on the way out. It would be refreshing if freeholders and developers work with the Government to embrace this change to make Commonhold the default type of home ownership rather than fight them every step of the way. They would be well advised to change their business models to support this. Change is coming.”.
The Residential Freehold Association (RFA), the trade body representing the UK’s largest professional freeholders responsible for c.1million leasehold properties, has also shard its views.
Natalie Chambers, director of the Residential Freehold Association (RFA), said: “We welcome any measure that improves consumer choice, but this should not be seen as a trade-off between leasehold and commonhold. As the Government’s own data shows, millions of leaseholders across the country are perfectly content with the tenure and we firmly believe that leasehold is the most effective way of managing large complex apartment buildings.
“In the absence of the leasehold system, residents would face greater financial and legal responsibilities for block maintenance and management – which the previous government’s own research suggests a majority of leaseholders are unlikely to be in favour of.
“The RFA has long called for responsible and proportionate reform of the leasehold sector, which is the most effective way of helping leaseholders and providing more good quality affordable and professionally managed housing. This includes introducing mandatory regulation of managing agents, as recommended by Lord Best in 2019, which will drive up standards for homeowners.”
