Beginning of the end for the 'feudal' leasehold system

Under the new proposals, leasehold flats will be banned, and commonhold will become the default tenure. This shift is designed to empower homeowners by giving them a genuine stake in the ownership of their buildings and providing more control and security over their homes. The changes are part of the government's commitment to honour its manifesto pledge to end the "feudal" leasehold system and ensure fairer living conditions for all.

Housing and Planning Minister Matthew Pennycook (pictured) 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.” He continued, “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.”

The new system will allow homeowners to fully own their property outright, without the need to pay ground rent or worry about escalating service charges dictated by a third-party landlord. Each homeowner will join a commonhold association, giving them a voice in the governance of the building and how it is managed. The reforms will ensure homeowners have control over maintenance costs and long-term repairs, with greater transparency in how these charges are spent.

Under the Commonhold White Paper, there will also be significant changes to how developments are built and managed. For example, new rules will allow commonhold to work for all types of buildings, including mixed-use developments and shared ownership properties. The framework will provide greater flexibility for developers, while maintaining consumer safeguards. To further support the system, mortgage lenders will be offered new protections to ensure the stability and solvency of commonholds, including mandatory public liability insurance and reserve funds.

The introduction of the Commonhold White Paper builds on previous reforms aimed at protecting leaseholders. These include the ability to buy the freehold or extend a lease without waiting for two years and improvements to the right to manage, which have already given leaseholders more control over their properties and service charges.

Further measures include the creation of a new Code of Practice that will establish clear rules for how costs are shared in a commonhold, ensuring transparency and fairness for consumers. The government has also committed to strengthening regulation of managing agents, which will be accountable to the homeowners rather than to landlords.

The reforms have been welcomed by many, but the government has also acknowledged that the transition from leasehold to commonhold will take time. A draft Leasehold and Commonhold Reform Bill will be published later this year, setting out the legal framework for these changes.

Under the current leasehold system, homeowners effectively rent their properties for a set period, with ownership reverting to the freeholder when the lease expires. This arrangement has led to frustrations, including rising ground rents, disputes over service charges, and a lack of control over the management of the building. In contrast, commonhold provides full ownership of the property, without the need to worry about expiring leases or ground rents. Homeowners will have the ability to make decisions about how the building is managed, with a democratic process for setting budgets and addressing any disputes.

The shift to commonhold is seen as a positive step forward, aligning the UK more closely with other countries, where similar systems have been successful in offering homeowners greater autonomy and control.

Key differences between commonhold and leasehold include full freehold ownership in commonhold, allowing owners to fully control their property without relying on a third-party landlord. Commonhold also removes the threat of forfeiture, which can result in leaseholders losing their home if they fall behind on payments. Additionally, the ability to hire or fire managing agents within a commonhold gives homeowners more influence over how their buildings are run.

The introduction of commonhold and the end of new leasehold flats will bring about a fundamental shift in the way homeowners interact with their properties. It is a move designed to create a fairer, more democratic housing system that prioritises the needs of homeowners over landlords, ensuring that people have more control over their living conditions.