Homeowners will not have to pay ground rent and will gain control over how their buildings are run, the government says under reforms it has set out today.
New leasehold flats will also be banned as the Ministry of Housing, Communities and Local Government bids to overturn the “feudal leasehold system”.
The moves come in the department’s Commonhold White Paper, which proposes to make commonhold leases “the default tenure” over leasehold.
Currently, leasehold properties revert to the freeholder after a fixed amount of time. A commonhold property is owned outright, like a freehold house.
Around 4.8 million people live in leasehold homes in England, which accounts for 19% of the nation’s housing stock.
The housing department says: “Unlike leasehold ownership where third-party landlords own buildings and make decisions on behalf of homeowners, these changes will empower hard-working homeowners to have an ownership stake in their buildings from the outset and will give them greater control over how their home is managed and the bills they pay.”
It says the paper is part of the government’s wider plan to build 1.5 million homes over the next five years. Over the previous five years, the country built around one million homes.
Changes set out in the Commonhold White paper include:
- Rules to allow 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
- Allowing mortgage lenders to protect their stake in buildings and protect the solvency of commonholds by such means as mandatory public liability insurance and reserve funds
- Strengthening the management of commonholds, with new rules around appointing directors, clear standards for repairs and agreeing an annual budget
Housing and planning Minister Matthew Pennycook says: “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.”
In September, the government pledged to “act quickly” to bring in leasehold reforms.
In May, the Residential Freehold Association said the previous government faced a £30bn black hole if its proposed leasehold reforms were passed. This legislation was passed but is yet to come into law.
The freeholder’s lobby group said at the time plans to cap ground rent and regulate service charges could leave the government open to huge compensation claims.
Today, director of the Residential Freehold Association Natalie Chambers says: “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.”
Homehold managing director Linz Darlington says: “Commonhold tenure was first introduced in 2002 but never took off. As a tenure Commonhold is similar to Tenements in Scotland, the Strata title in Australia, and the Condo in the US. It involves flat owners owning and managing their building together.
“A cornerstone in the reinvigoration of the Commonhold tenure is to ban leasehold on flats – but critically this only affects new build properties, not existing flats.
“While a move to Commonhold is a genuinely laudable aim it will create a ‘two-tier’ system of flats in the UK.
“New properties under the new style of ownership and management will be preferred by buyers to existing leasehold properties.
“This news will be received with exasperation for those people already trapped in leasehold properties with escalating ground rents, high service charges and fire safety issues – preventing many from selling or re-mortgaging their properties.
“The Leasehold and Freehold Reform Act 2024 was passed by the last Conservative government, but is largely not yet in force.
“If implemented swiftly, it has the potential to help the estimated 5 million existing leaseholders in England and Wales by making it cheaper for those with high ground rents or leases below 80 years to resolve these issues.”
