Commonhold will be at the heart of flat ownership reform
The UK Government has set out how it intends to ban the sale of new leasehold flats, expand the legal framework, and improve accessibility to make commonhold the default tenure for flats in both residential and mixed-use developments.
Propertymark welcomes efforts to address the entrenched problems in the leasehold system, and we have put forward our recommendations for strengthening the draft legislation, ensuring the role of professional managing agents is recognised and supported, and the sector has adequate time to prepare.
Regulation of property agents is essential
Propertymark has long campaigned for the implementation of the Regulation of Property Agents working group recommendations, including mandatory qualifications, a code of practice and a licensing system. We will continue to advocate for regulation to sit alongside leasehold and commonhold reform, giving consumers greater confidence in the professionals advising them and helping to ensure consistent standards across the sector.
Estate agents are often the first point of contact for consumers buying or selling a flat, so they must understand commonhold, the exemptions, and how to identify whether a property can legally be marketed and sold. Propertymark will produce guidance, introduce training and courses, and review how the ban can be embedded into compliance processes for members.
Commonhold will also bring new documentation and governance arrangements, including Commonhold Community Statements, local rules, Commonhold Unit Information Certificates and registers of members. Agents, buyers, lenders and managing agents will all need confidence in how these processes work.
What is being proposed?
The Draft Commonhold and Leasehold Reform Bill would apply across England and Wales, and cover a broad definition of “flat”, including conventional flats, houses converted into flats, purpose-built blocks, flats above commercial premises, rows of properties with shared underground parking, and properties that overhang or underhang a neighbouring boundary.
New purpose-built developments with flats for sale, houses newly converted into flats, commercial buildings redeveloped to include flats, purpose-built rental blocks where flats are later sold for homeownership, and other residential buildings with no existing registered long residential leases would all fall under the new rules.
Build to Rent and social rent blocks built exclusively for rent would be excluded. However, if flats in a purpose-built rental block were later marketed for sale to homeowners, the ban would apply.
How would the ban work?
Advertising a new leasehold flat for sale, or granting a new lease on a flat, would not be allowed, unless the flat qualified for an exemption. All new long leases of flats registered with HM Land Registry would need a prescribed statement confirming compliance with the ban.
Buyers would have redress rights if they were unlawfully sold a leasehold flat, including the right to obtain the commonhold of their flat at no cost.
HM Land Registry must be properly resourced to implement this system because estate agents use its data to verify tenure, ownership and restrictions. If Land Registry information is not accurate or up to date, agents will struggle to comply, and consumers may not fully understand what they are purchasing.
What exemptions are being considered?
The consultation recognises that some long leases may still be necessary within commonhold, including shared ownership, home purchase plans, and equity release products. MHCLG is also considering if exemptions are needed for land that cannot currently be registered as commonhold (such as certain flying freeholds, agricultural land and some contingent titles) and for certain types of development, including parts of the retirement housing sector.
How would existing leaseholds be affected?
The UK Government has stated that existing leasehold flats will not be covered by the ban, and Propertymark agrees with this approach. Forcing existing leaseholders to buy the commonhold before selling could create an unaffordable burden and trap people in homes they would otherwise be able to sell. Instead, existing leasehold flats should be able to move to commonhold over time.
For mixed-use buildings with a sitting commercial tenant and no residential long leases, the commercial and residential parts should be treated separately to avoid unnecessary disruption to commercial leases and allow the residential part to move towards commonhold where practical.
Transitional arrangements
Self-contained blocks where new leasehold flats have already been sold at the point the rules change will be allowed to continue selling leasehold flats in that block. Future phases of the same site would need to move to commonhold.
Where leases have already been granted, allowing sales to continue is the least disruptive option and would avoid the need for leases to be withdrawn or converted. We do not believe a time limit is needed for completing those blocks, as an arbitrary deadline could risk flats being left unfinished.
For developments on leasehold land, MHCLG is considering exemptions where land was acquired before the ban, where planning permission is already in place, where construction has started, or where the first sale takes place within a fixed period.
Kindly written by propertymarkImage courtesy of Adobe
