he UK government has announced plans to end the leasehold system for new properties. This reform aims to make commonhold the standard form of property ownership for houses and flats. The change is expected to bring greater transparency and fairness to homeowners, who will have more control over their properties. But this is so so misguided. If you are going to buy a new build flat in the future, commonhold is a disaster coming your way.

Leasehold ownership has long been a part of the property market in England and Wales. Under this system, buyers own their property for a set period but do not own the land it stands on. Freeholders, also known as landlords, retain land ownership and impose various charges, including ground rent and service fees. Many leaseholders have faced rising costs, a lack of transparency, and limited control over building management.

What does Commonhold offer leaseholders and apartment owners?

Commonhold offers a different approach. It allows property owners to have full ownership of their homes while sharing responsibility for managing communal areas. A commonhold association, run by homeowners, will oversee maintenance and service costs. This system removes the need for third-party freeholders and ensures that homeowners have a direct say in decision-making. Yet, why do we need this when so many new build developments since the 1980's have already have sold with a Resident Management Company (ManCo) thereby already giving leaseholders full responsibility and control for managing their block in any event.

Why is Commonhold no better than leasehold? Is Commonhold actually worse?

Commonhold is not the solution.  Our view and that of almost all practitioners is that commonhold is not an improvement on the current situation given changes to leasehold already introduced in recent years.  Any ManCo is already in as good a position as commonhold would give them (save for paying ground rent to a freeholder).   However, ground rent is no longer a problem since The Leasehold Reform (Ground Rent) Act 2022 abolished all ground rents on new long leases when it came into force on the 30th June 2022. 

ManCos already have responsibility to manage, maintain, fix, and repair a development or buildings therein.  If a developer goes bust they already hold the responsibility to fix the failed heating systems, address developer design and install faults, and are the responsible person for fire safety (fire risk assessments, fire door inspections and the like).  They are also the responsible person to hold a developer to account for any building safety defects - so it is nonsence that Commonhold is being lauded in parliament as the solution.    

The great thing about a ManCo is, ultimately, if the ManCo does go bust there is a Freeholder.  And, where this is a commercial freeholder (as opposed to a Freehold Management Company owned and run by the leaseholders), the freeholder will be able to employ commercial decision making and will step in to protect his freehold reversion (reversion means the interest that the freeholder retains, e.g., that after the leases of the flats have expired, the right to the properties returns to them).   

What is the take up in Commonhold in the UK? Or how many times has Commonhold been used?

Commonhold will only make things worse for millions of leaseholders. If Commonhold was any good then the take up would have been huge over the last 20 years. According to the Commonhold White Paper published by the UK government (para 1.11) there have been fewer than 20 developments sold on a commonhold basis which represents fewer than 200 commonhold homes.

The Ministry of Housing, Communities and Local Government of the United Kingdom (MHCLG) intends to introduce new rules to make commonhold work for different types of developments, including shared ownership properties. A new Code of Practice will also clarify how costs are divided among residents and establish clear management standards. A key part of the reform is making it easier for current leaseholders to transition to commonhold. In the government's eyes Commonhold is part of its stated commitment to simplifying buying a freehold or extending a lease.

Right to Manage or Commonhold?

Since the Commonhold and Leasehold Reform Act 2022, which was intended to introduce Commonhold, something more useful was actually introduced: the Right to Manage. Leaseholders have rights to challenge servicechargesorted.co.uk/blogs/digital-solution-can-improve-the-whole-process-by-making-it-faster-and-more-transparent'>service charges and take greater control over their buildings through Right to Manage provisions. It takes just 50% of leaseholders to want to be part of a right to manage movement and a simple process as claiming the right is a 'no fault process' meaning that the leaseholders do not have to prove any act or omission by the current manager or freeholder to successfully achieve their right to manage.

The Leasehold and Freehold Reform Act 2024 was a significant step towards ending leasehold ownership. The next phase involves introducing a draft Bill in 2025 for further consultation. The government aims for the commonhold to become the standard tenure by the end of this Parliament (perhaps 2028 or 2029). The government has pledged to work with industry experts and consumer groups is ongoing to ensure a smooth transition.

The government argues that the leasehold reforms agenda will provide more opportunities for existing leaseholders to secure fairer terms in extending leases, reducing costs, and challenging excessive charges. These changes are welcomed. However, the transition to commonhold will take time, and existing leasehold properties will continue to operate under the current system for the foreseeable future. The government has also committed to ensuring that new developments meet high standards while maintaining protections for homeowners. Greater flexibility in development rights is expected to encourage construction while safeguarding residents' interests.

Despite the challenges ahead, these changes mark a significant shift in property ownership in England and Wales. The government seems determined to end what many see as an outdated and unfair system. Homeowners will benefit from increased control, reduced costs, and greater transparency in managing their properties. As the transition unfolds, further details will emerge on how commonhold will be implemented and how existing leaseholders will be supported. The government remains committed to working with stakeholders to ensure homeowners receive fair treatment and a more secure future.

FAQs

1. What is the difference between leasehold and commonhold?

Leasehold means the property is owned for a fixed period, with a freeholder retaining control of the land. Commonhold allows homeowners to own their property outright while jointly managing shared spaces.

2. Will current leaseholders be forced to switch to commonhold?

No, but the government is working on ways to make it easier for leaseholders to transition if they choose to do so.

3. When will commonhold become the standard?

The government aims for commonhold to be the default tenure by the end of this Parliament, with a draft Bill expected in 2025.