The government has set out its plans to abolish the “feudal” leasehold system and replace it with a commonhold system.
Earlier today, the Ministry for Housing, Communities and Local Government published a white paper that it said would “reinvigorate commonhold and make it the default tenure”.
It said that under the new commonhold system, “homeowners will have a stake in the ownership of their buildings from day one, not have to pay ground rent, and will gain control over how their buildings are run under major plans to bring the feudal leasehold system to an end”.
It pointed out that commonhold-type models were used all over the world and said it was determined to “see it take root” in the UK through both new commonhold developments and by making conversion to commonhold easier.
Housing and planning minister Matthew Pennycook said: “This government promised not only to provide immediate relief to leaseholders suffering now but to do what is necessary to bring the feudal leasehold system to an end – and that is precisely what we are doing. By taking decisive steps to reinvigorate commonhold and make it the default tenure, we will ensure that it is homeowners, not third-party landlords, who will own the buildings they live in and have a greater say in how their home is managed and the bills they pay.
“These reforms mark the beginning of the end for a system that has seen millions of homeowners subject to unfair practices and unreasonable costs at the hands of their landlords and build on our Plan for Change commitments to drive up living standards and create a housing system fit for the twenty-first century.”
Following the introduction of a comprehensive new legal framework for commonhold, new leasehold flats would be banned, and in the meantime the government will continue to implement reforms to “help millions of leaseholders who are currently suffering from unfair and unreasonable practices at the hands of unscrupulous freeholders and managing agents”.
A new code of practice will set out how costs should be apportioned in commonhold and the government said it was committed to strengthening regulation of managing agents. The government will also launch a consultation to ban new leasehold flats later this year to explore the best way forward.
A draft Leasehold and Commonhold Reform Bill will be published later this year setting out the legal framework for how reformed commonhold will work.
In response to the news, Ian Fletcher, policy director at the British Property Federation, said: “We are broadly supportive of the introduction of a commonhold system, but there are a few areas where government must tread carefully. First, large mixed-use developments are complex to manage and maintain so commonholders will need access to training. In addition, investors will need assurances that commercial areas or ‘sections’ are properly managed.
“Second, we need a clear process for transitioning from leasehold to commonhold, which will require alignment between lenders, conveyancers, insurers and agents. This is likely to take time and in the interim there is a risk that the value of leasehold homes are negatively impacted, which will not help owners or liquidity in the housing market.
“There also is a question around how many people will volunteer to take on the management of buildings. This can be stressful and time-consuming and the reality is some people are happy to rely on a professional freeholder. To make this work government will need to stimulate volunteering on an unprecedented scale.
“Finally, this is not about rhetoric around feudalism, but fundamentally about how best to own property and manage communal living areas. That may be commonhold – and there is no reason it should not work in the UK – but before we take that leap, we should be weighing up the pros and cons.”
