HM Government white paper: leasehold and commonhold reform

On 3 March, the Government announced a White Paper to see through their election pledge to ban sales of leasehold flats, a process that “marks the end” to the “feudal system”, and one that is heralded as providing owners of such flats greater control over their properties with a move to the fairer commonhold system.

On the face of it, both leasehold and commonhold might look the same. But there are differences.

If you own a leasehold property, you own the property but not the building nor the grounds where it's situated. This means that you have to pay a ground rent to a landlord, along with an annual service fee for the upkeep of the common areas - this is one of the key problems in that the leaseholder has no control over these costs and little input into how the common areas are managed and maintained. In addition, the lease is for a set number of years, which requires occasional extensions to the term, which can be expensive.

A commonhold property sees the property owners having a key input to the management of the buildings they own, deciding on what is to happen with the building maintenance and what service charges should be. Crucially, commonhold offers full freehold ownership, meaning they own their property without having to pay the additional ground rent that comes with leasehold properties. Equally important is that forfeiture on the property is not possible.

In their announcement, the Ministry of Housing, Communities and Local Government (MHCLG) confirmed that sales of leasehold flats would be banned once the legislation has been passed through the Governmental tiers.

The MHCLG also stated that the commonhold process would adhere to strict guidelines to ensure that properties don't fall into disrepair - a key requirement to give mortgage lenders the reassurance they need that their investment in a commonhold will be adequately protected - a critical step to ensure that those wanting to buy a commonhold property aren't treated unfairly when it comes to financing the purchase.

Because not all common areas will be used by all of the properties within a commonhold agreement, there is also a planned provision to split the buildings into specific sections, thus allowing homeowners in the commonhold agreement to only manage and pay for the common areas and specific amenities that are of benefit to them. 

The commonhold association, which is set up with representatives from each property, will have the ability to vote for the budget for the coming year, too, rather than being subject to costs imposed by the landlord.

Commonhold arrangements will give homeowners the power to fire and appoint managing agents rather than being at the whim of the landlord, making them accountable to those in the commonhold.

A new Code of Practice will set out how costs should be apportioned in commonhold in a move to provide homeowners with clarity and transparency, while the Government states that they are “committed to strengthening regulation of managing agents”.

The primary driver is to give homeowners a stake in the ownership of their buildings, giving them “more power, control and security of their homes”.

Housing and Planning Minister Matthew 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.”

It will take time for the White Paper to make its way through the Houses of Commons and Lords to become an Act of Parliament.

However, the MHCLG has confirmed that the draft Leasehold and Commonhold Reform Bill will be published later in 2025, which will set out the legal framework for how the reformed commonhold process will work.

The process of leasehold reform will continue in the interim as laid out in the Leasehold Reform Act of 2022, with tightening of controls and legal framework flaws that currently exist.

Whether you are looking to buy a flat or other type of property, you'll want to make sure that all the legal requirements are fully covered, ensuring that you have a clear understanding on what purchasing the property will mean to you.

To this end, look no further than Homeward Legal.

Our conveyancers will start work on your plans as soon as you agree to the quotation and appoint them to represent you.

Homeward Legal will also provide a quote that will not change - what you are quoted is what you pay for standard conveyancing process, which means you can effectively budget for your conveyancing needs.

There are some unforeseen items that might arise during the purchase and/or sale, which includes a specialist flood assessment report, but the solicitor discusses these and their cost as they come up.

In addition, to protect the homebuyer further, Homeward Legal operates a ‘no completion, no fee' promise, which ensures that, should the purchase or sale not go through as planned to completion status, no payment is required.

Call to get your conveyancing quote started, or to discuss your concerns with your plans to move.

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