The government has outlined plans to phase out the leasehold system and replace it with commonhold as the default form of homeownership in England and Wales.
In a speech at the Institute for Government think tank earlier this week, Housing Minister Matthew Pennycook said the current leasehold model was “outdated” and placed financial pressure on millions of homeowners, with reform aimed at giving residents greater control over their properties.
The proposals form part of a wider programme to dismantle the leasehold system over the course of this Parliament, rather than through immediate abolition.
The government’s approach will focus on preventing the creation of new leasehold properties while making it easier for existing leaseholders to convert to commonhold or take greater control of their buildings.
LEASEHOLD BAN
Draft legislation published earlier this year sets out plans to ban new leasehold flats, building on existing restrictions on leasehold houses, and introduce a revised legal framework to support wider adoption of commonhold.
Under the proposals, conversion to commonhold would be possible where at least 50% of leaseholders agree, alongside measures designed to make enfranchisement cheaper and more accessible.
The reforms also include plans to cap ground rents, remove so-called “marriage value” from valuation calculations and introduce changes aimed at improving transparency around service charges and management costs.
The government said it would also abolish leasehold forfeiture and replace it with a more proportionate system for dealing with breaches of lease terms.
The changes are expected to be introduced through a comprehensive Commonhold and Leasehold Reform Bill, alongside secondary legislation to implement measures already contained within the Leasehold and Freehold Reform Act 2024.
STAGED REFORM
Pennycook (main picture, inset), Minister of State for Housing and Planning, said: “The aim of this government is nothing short of the dismantling of the leasehold system and the corresponding emancipation of leaseholders.
“This will not happen overnight, but through a carefully sequenced programme that prevents the system from perpetuating itself while empowering existing leaseholders to take control.”
He added that reform would be delivered in stages, with a focus on creating a fairer and more efficient housing market while avoiding disruption to existing ownership structures.
The government also confirmed plans to strengthen regulation of managing agents and improve protections for homeowners on privately managed estates, as part of a broader overhaul of property law.
CHALLENGING AREA
Timothy Douglas, Head of Policy and Campaigns at Propertymark, says: “Leasehold reform remains an extremely challenging area.
“Propertymark has long campaigned for the UK Government to address concerns that both consumers and property agents have, including managing the challenging leasehold market and better safeguards for consumers regarding unfair lease terms.
“Recent Propertymark data highlighted that 76% of our member agents raised that leasehold properties have become more difficult to sell in the past 24 months.
“This clearly demonstrates the wider scale issues faced within the marketplace and the detrimental effects to consumers present in the existing leasehold system. These issues must be addressed to support the sale of leasehold flats.
“Propertymark will continue to work closely with the UK Government to help ensure there is a clear and practical pathway towards restructuring leasehold, so that millions of consumers can benefit from a system that provides them with clarity and greater fairness.
PROFESSIONAL SUPPORT
And he adds: “In the move towards commonhold, the UK Government must not underestimate the responsibility on commonholders, property agents, and estate agents in particular, who will also need to understand the detail as they support consumers to buy and sell commonhold property.
“To this end, it is vital that commonholders, as well as leaseholders, can rely on a professional and regulated property agent and management sector to support them.
“Reforms must also deliver on commitments for mandatory qualifications, and to bring forth the regulation of property agents, to further improve outcomes for homeowners.”
