Future government plans for leasehold and commonhold reform

Matthew Pennycook, the Minister of State for Housing and Planning, recently issued a written ministerial statement setting out the government’s plans for leasehold and commonhold reform over the coming year.

Property law expert Eleanor Longworth, from WHN, outlines the key points from the statement. 

The plans include substantial changes for landlords, leaseholders and management companies. Mr Pennycook opens by stating that the government is determined to “do what is necessary to finally bring the feudal leasehold system to an end.” He acknowledges however, that it is complex and will take time.

The Leasehold and Freehold Reform Act 2024 (LFRA 2024), was enacted by the previous Conservative government, in the wash-up period prior to its dissolution. The key points are as follows:

• LFRA 2024 only enacted a select number of the Law Commission recommendations relating to enfranchisement and right to manage.
• The government intends to give leaseholders greater rights, powers and protections over their homes by implementing its provision however, it needs to be carefully considered because as drafted there are flaws.
• An extensive programme of secondary legislation will be required to remedy the flaws and to implement LFRA 2024. 

Timetable and consultation

The following timetable is mentioned:

• In January 2025, the government intends to remove the requirement for leaseholders to wait two years after purchasing their property before exercising rights to buy their freehold or extend their lease.
• In Spring 2025, the right to manage provisions will be brought into force, meaning more leaseholders in mixed-use buildings can take over management from their freeholders, and leaseholders making claims will, in most cases, no longer have to pay their freeholder’s costs.

Consultations will be undertaken on:

• service charges and legal costs, relating to service charge disputes;
• valuation rates used to calculate enfranchisement premiums; and
• greater protections for homeowners who pay estate management charges.

It will publish a White Paper on commonhold reforms early next year and a new Draft Leasehold and Commonhold Reform Bill can be expected in late 2025 focusing on commonhold reforms.

What is commonhold?

Commonhold is a form of freehold ownership and can be used in relation to flats, houses, mixed use and commercial developments. The owners of each unit on a commonhold development are collectively in control of management. Although launched in 2004, it has not been popular.

The government intends to consult on the best approach to banning new leasehold flats, and converting existing flats to commonhold, with a view to making commonhold the default tenure by the end of this parliament.

Other plans outlined in the ministerial statement

In the government’s view, LFRA 2024 does not go far enough, and it plans to address the Law Commission recommendations that were left untouched, such as unregulated and unaffordable ground rents; the poor quality of service provided by some managing agents; the threat of forfeiture as a means of ensuring compliance with a lease agreement; and the prevalence of ‘fleecehold’ private and mixed-tenure housing estates.

Further consultation and legislation can be expected.

The government appears committed to overhauling the current system of home ownership. We will keep you updated.

This post is an update to Eleanor’s previous article explaining the government’s intended objectives in the Leasehold and Freehold Reform Act 2024

Eleanor Longworth specialises in residential long leasehold dispute resolution matters, acting on behalf of landlords, management companies and leaseholders.

For further advice on acquiring a freehold, extending your lease or any other leasehold dispute resolution matter, call Eleanor Longworth on 0161 761 4611 or by email [email protected]