The UK government is preparing to radically transform homeownership structures by prohibiting the sale of new leasehold flats, marking what officials describe as the "beginning of the end" for the long-standing leasehold system. Housing Minister Matthew Pennycook announced this significant reform aimed at transitioning to commonhold ownership, which allows homeowners greater control and ownership rights over their properties.
Under the current leasehold system, which many critics deem feudal, third-party freeholders own the buildings, and leaseholders merely acquire the right to occupy flats for specified periods, often extending beyond 99 years. This model has been heavily criticized, especially due to complaints from homeowners about spiraling service charges and minimal transparency from landlords. Betty, one such homeowner who experienced these frustrations firsthand, lamented, "I feel like I have absolutely no control, and it makes me feel really anxious." Her situation reflects the struggles faced by countless leaseholders across England and Wales.
The White Paper released on Monday clearly lays out the government's ambitious plans. They include banning any future leasehold flats and instituting commonhold as the default ownership tenure. Commonhold ownership empowers homeowners to possess their flats outright—eliminates ground rent obligations, and facilitates cooperative decision-making on communal areas. Pennycook stated unequivocally, "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's precisely what we are doing."
The new legislation will apply across England and Wales, where it is estimated around five million homes are leasehold, predominantly apartments. Many leaseholders reported exorbitant service charge increases. For example, Kasia Tarker, who bought her West London flat, saw her monthly service charge jump from £65 to over £200 within just one year. "I don’t know what I am going to do; I am going to have to try and sell the flat or become homeless," she declared, highlighting the dire choices some homeowners face.
The proposed shift to commonhold, already practiced successfully in various countries around the world, seeks to provide homeowners with greater agency. Under commonhold, proprietors will collectively own their buildings and coordinate maintenance, budget, and other management tasks, leading to improved oversight and fairness. Natalie Chambers, from the Residential Freehold Association, argues for the merits of leasehold, asserting, “Millions of leaseholders across the country are perfectly content with the tenure.” Nonetheless, the government remains focused on reforming homeowner rights.
The forthcoming draft Leasehold and Commonhold Reform Bill is expected to deliver details on how the transition to commonhold will be implemented, with officials noting plans to make it easier for existing leaseholders to convert their leases to commonhold systems. Katie Kendrick, founder of the National Leasehold Campaign, emphasizes the urgent need for mechanisms enabling existing leaseholders to escape the older system. She pointed out, "While focusing on preventing future leasehold abuses is pivotal, it's equally important to address the plight of existing leaseholders currently bound by the inequitable leasehold system."
Pennycook reinforced the government’s commitment, expressing determination to allow existing leaseholders the option of shifting to commonhold, which could help them regain control over their financial obligations moving forward. If passed, this bill could represent one of the most significant reforms to homeownership policies seen in recent decades.
Prices for service charges have seen alarming growth; reports indicate service charges rose by 11% across the country, with estate agent Hamptons noting average costs now reaching £2,300 annually. The increasing discontent about these charges, combined with growing calls for reform, positions the government’s announcements as both timely and necessary.
There are specific directives highlighted within the Commonhold White Paper, including enabling commonhold to function effectively for diverse developments and providing homeowners with solid protections against steep ancillary charges. The government is also set to introduce new measures to assure mortgage lenders and maintain the solvability of commonhold associations, assuring potential buyers and residents of their investments.
The government will roll out consultations later this year to ascertain the best approach for outlawing new leasehold flats alongside the draft bill. These steps signal the government’s dedication to reducing obstacles for existing owners to convert, fostering greater autonomy and security over their homes.
Pennycook’s comments encapsulate the government’s approach as they seek to instill confidence among current homeowners, stating, "These reforms mark the beginning of the end for a system... subjecting homeowners to unfair practices." All unnecessary hurdles and previous system constraints must be dismantled, paving the way for future homeowners to enjoy rights and responsibilities equitably. The anticipated changes lean toward achieving fairness and empowerment for homeowners, illustrating the government's pledge to transform the UK housing system definitively.