Plans to ban new leasehold flats in England and Wales are moving forward as part of the government’s latest effort to reform homeownership.
Currently, the leasehold system allows third-party landlords, known as freeholders, to own the building while leaseholders purchase the right to live in a flat for a set period. This arrangement often leaves homeowners with limited control over their properties and subject to fees and restrictions imposed by freeholders.
The government aims to replace this system with commonhold ownership, a structure widely used in other countries. Under commonhold, homeowners would jointly own and manage the building, giving them greater control over their living spaces.
Officials argue that this shift will create a fairer and more transparent housing market, reducing disputes over service charges and lease extensions. However, the proposal has sparked debate among property stakeholders.
Freeholders argue that leasehold is the most effective way to manage large and complex apartment buildings, ensuring essential maintenance and shared responsibilities are handled efficiently.
Despite opposition from some sectors, the proposed ban on new leasehold flats is seen as a significant step towards reshaping property ownership in the UK.
The government’s reforms are expected to have a major impact on future housing developments, influencing how flats are built, sold, and managed. Further details on the transition to commonhold are expected to be announced in the coming months.
The government has yet to outline specific plans for converting existing leasehold properties to commonhold. However, it has expressed a strong commitment to making the transition easier for homeowners.
A white paper published on Monday confirmed that the sale of new leasehold flats would be banned. It also outlined plans to “reinvigorate” commonhold by introducing a new legal framework to support the system.
Later this year, the government is expected to release a draft Leasehold and Commonhold Reform Bill, which will detail how the new system will operate. The proposed legislation will apply in England and Wales, where an estimated five million properties are leasehold—70% of which are flats.
Housing Minister Matthew Pennycook described the current leasehold system as “inherently unfair,” stating that reforms are necessary to give leaseholders greater control over their homes and associated costs. Many leaseholders struggle with rising fees for maintenance and repairs, which they have little power to challenge.
Concerns over service charges have been widely reported. Following a BBC investigation last year, around 1,000 people reached out to share their experiences of high and unpredictable fees in leasehold properties.
One such case is Kasia Tarker, who purchased a one-bedroom flat in Southall, West London, in 2022. Her service charge has risen dramatically, increasing from approximately £65 per month in 2022 to over £200 per month this year.
Kasia says she feels helpless and financially overwhelmed by the rising costs. “I am going to have to try and sell the flat or become homeless—I don’t know what I am going to do,” she said.
FirstPort, the property management company that took over Kasia’s development in 2023, stated that rising insurance and health and safety costs were beyond its control.
While Kasia would like more control over her service charges, the government’s proposed reforms only apply to new developments. This means existing leaseholders like her may not see immediate relief from the challenges of the current system.
Jean Hopkin, a leaseholder in Sheffield, has seen her service charge increase by an astonishing 356% over four years. What was once a manageable £106 per month has now surged to £483, making her three-bedroom flat nearly impossible to sell due to the high costs.
Similarly, Jenny Baker from Southampton is also struggling to find buyers for her property. Her service charges have escalated to £7,200 per year, which she believes is completely unjustified.
“The state of the apartment block is just terrible,” Jenny said. “The windows don’t get cleaned, and there’s black mould on the outside of the building—what on earth am I paying for? I feel stuck. I can never come out of it. I feel like I have absolutely no control, and it makes me feel really anxious.”
Rendall & Rittner, the company managing both Jean and Jenny’s buildings, has not publicly commented on the situation.
According to property firm Hamptons, service charges in England and Wales have risen by 11% between 2023 and 2024, with the average leaseholder now paying £2,300 annually for communal maintenance and services.
Property management companies argue that rising costs are due to legitimate expenses such as increased energy prices and higher inflation rates. However, many leaseholders believe they are being unfairly charged.
Under the current system, the freeholder or landlord appoints a managing agent, leaving leaseholders with little control over costs. The government has proposed replacing leasehold with commonhold, a system that would give residents more say over their expenses and the choice of who manages their building.
What Is the Difference Between Leasehold and Commonhold?
- Leasehold: The property is owned for a fixed period, after which ownership reverts to the freeholder. The freeholder or landlord controls communal costs, and leaseholders have little say in management decisions.
- Commonhold: Homeowners own their property outright, similar to a freehold house. They have control over maintenance decisions, can vote on annual budgets, and have the power to hire or dismiss managing agents. Additionally, there is no ground rent, and residents cannot be threatened with forfeiture of their home.
Despite growing support for commonhold, not everyone agrees with the proposed changes.
Natalie Chambers, director of the Residential Freehold Association (RFA), argues that leasehold remains the best system for managing large apartment buildings.
“Millions of leaseholders across the country are perfectly content with the tenure, and we firmly believe that leasehold is the most effective way of managing complex apartment buildings,” she said.
She also warned that commonhold could place greater financial and legal responsibilities on residents, making block maintenance and management more challenging.
‘Significant step’
The National Leasehold Campaign (NLC) has welcomed the government’s latest announcement, calling it a major step forward in reforming the leasehold system.
However, NLC founder Katie Kendrick stressed that existing leaseholders must not be overlooked.
“While preventing future leasehold abuses is crucial, it’s equally vital to address the struggles of those already trapped in the system,” she said. “Commonhold conversion mechanisms are essential to provide an escape route for affected homeowners.”
Housing Minister Matthew Pennycook assured that the government remains committed to helping millions of leaseholders currently facing challenges.
“What we don’t want is a two-tier system,” he told the BBC. “All existing leaseholders in blocks will be able to convert to commonhold.” He added that a draft plan would be outlined later this year to make the process “very easy” for homeowners.
While some leasehold buildings will remain even after the ban on new leaseholds takes effect, Pennycook said those homeowners would still receive “greater protections” under the new system.
In 2023, then-Housing Secretary Michael Gove expressed a desire to abolish leasehold altogether but later opted for a series of reforms instead.
Some of these changes have already been implemented, including the removal of the “two-year” rule on lease extensions and new regulations granting leaseholders in mixed-use buildings greater rights to manage their properties.
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