UK Government plans to reform Leasehold and commonhold systems

The UK Government has launched a consultation seeking views on Law Commission proposals to allow more residential leaseholders in England and Wales to buy the freehold of their property or take over the management of their buildings.

Support for leasehold

Leaseholders living in mixed-use buildings cannot currently enfranchise or claim a right to manage if 25 per cent or more of their building’s floor space is utilised for non-residential units. The UK Government wants to increase this limit to 50 per cent, as it believes it would enable more leaseholders to buy their freehold or take over management of their building.

New plans by the UK Government would reduce the price paid by leaseholders for a freehold by requiring landlords to retain an interest in any units not participating in the enfranchisement claim, with additional proposals in the consultation aiming to make it cheaper for leaseholders to collectively buy their freehold. 

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A ‘mandatory leaseback’ would require landlords to keep a lease on some properties in the building, reducing the cost of a collective buyout of their building, making buying their freehold affordable for more leaseholders. 

The current leasehold system is outdated, unbalanced and broken and we are determined to fix it. Our proposals aim to rebalance power and should see more leaseholders than ever before owning the full rights to their homes. This comes on top of our new approach building safety, which includes decisive action to protect leaseholders.
Lord Stephen Greenhalgh Minister for Building Safety and Fire | DLUHC
I welcome this consultation as an important step towards implementing the Law Commission’s recommendations on leasehold reform, which were jointly commissioned by the Welsh and UK governments. I want us to work together on these important reforms to ensure they reflect the best interests of leaseholders in Wales.
Julie James MS Minister for Climate Change

Support for commonhold

The UK Government is also calling for views on changes to support greater use of commonhold as an alternative form of homeownership to leasehold – including for those in Shared Ownership schemes in England.     
The commonhold model allows homeowners to collectively own the building their flat is in from the outset, with a greater say on their building’s management, shared facilities and related costs.       
Consumers and providers of Shared Ownership homes are now being invited to have their say on how decision-making in commonhold blocks could operate under the new Shared Ownership model, in England.      
The consultation is running for six weeks until 22 February 2022, and Propertymark members can respond directly or send views and opinions to Propertymark’s Policy and Campaigns Team

Leasehold reform (Groundrent) Bill

In addition to these reforms, the Leasehold Reform (Ground Rent) Bill is currently making its way through Parliament. Once passed the legislation will put an end to ground rents for most new residential leasehold properties as part of the most significant changes to property law in a generation. 

Furthermore, as well as limiting ground rent to a peppercorn for most new residential leases, provisions in the Bill also mean that when a leaseholder extends their lease using the non-statutory process, the ground rent they pay on the extended term will be limited to a peppercorn.