Leasehold reforms and commonhold- explained

What is commonhold and how will it affect existing leasehold properties?

With commonhold gaining new traction following government announcements in early March, it is a good time for property professionals to familiarise themselves with this alternative to leasehold that looks set to become the default form of flat ownership.

What is commonhold?

Commonhold is a legal form ownership that involves owning a commonhold unit (flat) with the gardens and common grounds of an apartment building being owned by a commonhold association. Each unit holder takes a share in the association. The association is then governed by a commonhold community statement and a substantial departure from leasehold is that only unit holders can be members of the commonhold association.

This is a move away from the leasehold model whereby it is typical for the freehold to be owned by a third-party individual or company, which then appoints a property manager. Under the commonhold model only unit holders make decisions with regards to the building.

Ownership of the commonhold unit or flat also exists without any time limits, unlike a residential lease which will usually require a lease extension as the lease term reduces. There is also no ground rent payable by commonhold unit holders, illustrating another way in which the new legal model will differ.

When will it apply?

The government published the commonhold white paper on 3 March 2025 [https://www.gov.uk/government/publications/commonhold-white-paper/commonhold-white-paper-the-proposed-new-commonhold-model-for-homeownership-in-england-and-wales#areas-we-are-still-working-to-resolve] which sets out the details of the push towards commonhold. The paper also makes clear that the government will continue to legislate to improve the existing leasehold system and modify the rules applicable to service charges, whilst ultimately seeking to replace leasehold in the long term.

Buried in the detail of the proposals is a statement that the government will “publish a draft Bill in the second half of 2025 for pre-legislative scrutiny”. We can therefore expect to start seeing new commonhold units at some point next year, and it would be wise to prepare management systems and software for this new form of tenure that will be hitting the market.

Will all leaseholds become commonhold?

In short, no. The proposals are to ban new leasehold flats being created, which will mean the creation of new commonhold units as more new flats are built. In terms of existing leaseholds, these will need to be converted to commonhold following a procedure that will be set out in new laws to be published.

How will commonhold affect the existing property market for flats?

There are many views on this, and it is difficult to predict, simply as there has perhaps never been a wholesale change to flat ownership on this scale before. Some experts fear the creation of a two-tier market with buyers opting for the new form of flat ownership, which is designed to be fairer, therefore avoiding the known issues with leasehold, such as costly lease extensions.

On the other hand, some argue that the uncertainty of a new legal model might tempt buyers to stick with what they know, and wait for others to test the water with how commonhold might work in practice. Historically, commonhold has had a very slow adoption rate (there are reportedly fewer than 20 in existence as against 4 -5 million leasehold titles) due to mortgage companies being reluctant to lend against a commonhold flat. With that said, the government is very much engaged in ironing out the issues that led to the failed first attempt at rolling out commonhold in 2002 and one way or another, it seems that we will be hearing a lot more about commonhold as we move through 2025.

Ricky Coleman is a leasehold solicitor and author of legal blog Peppercorn Law

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