Representatives of the legal profession and property industry have given a mixed reaction to government plans to ban new leasehold flats and adopt commonhold.

The government has published a white paper stating that commonhold will be “reinvigorated” through a new legal framework, and the sale of new leasehold flats will be prohibited.

A draft Leasehold and Commonhold Reform Bill is to be published later this year, which will include details of how reformed commonhold will work.

In the meantime, Scott Goldstein, partner at Payne Hicks Beach, has warned that significant action is needed to make the plans work.

He said: “Commonhold has never caught on. The announcement is the latest in a series of initiatives introduced since 2002 to try to spread the use of commonhold. The concern is to make sure that the system is ready to cope.

“Lenders must be encouraged to give mortgages to purchase flats held on commonhold. There must be robust financial controls in place to ensure commonhold blocks have the resources they need to manage their properties.

“Finally, as commonhold blocks are always run by property owners, many more of us will be involved in property management.

“The government needs to provide easy-to-follow resources to educate and train all of us about the rights and responsibilities of commonhold.” 

More reaction:

Katie Cohen, Keystone Law’s residential property partner, said: “The publication of the government’s Commonhold White Paper represents a significant step towards reforming the leasehold system. However, commonhold has been on the statute books for many years and therefore the ‘reinvigorated’ attempt to bring forward tenure to be the default tenure going forward is interesting. 

“For years, leaseholders have faced numerous challenges, including escalating ground rents, limited control over property management, and the complexities of leasehold enfranchisement itself. The White Paper’s proposed reforms to encourage the transition from leasehold to commonhold ownership are an exciting development.

“Commonhold provides an alternative to the traditional leasehold model, where property owners will hold the freehold of their individual units while jointly owning and managing the building’s common areas. This shift aims to offer leaseholders greater control, more long-term stability, and a reduction in the burdens of ground rent. 

“Arguably, this control is already afforded by leaseholders who have collectively enfranchised their properties and granted themselves new 999 year leases.

“While it remains to be seen how quickly and effectively these reforms will be implemented, this marks a promising shift towards empowering leaseholders and improving their long-term property rights. We await any details for the conversion of existing leasehold to commonhold ownership, a detail which may or may not appear in the draft Bill to be published later in the year. We look forward to further developments in the coming months in the ever fast-paced moving area of leasehold reform.”

Natalie Chambers, director of the Residential Freehold Association (RFA), said: “We welcome any measure that improves consumer choice, but this should not be seen as a trade-off between leasehold and commonhold. As the government’s own data shows, 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 large complex apartment buildings.

“In the absence of the leasehold system, residents would face greater financial and legal responsibilities for block maintenance and management – which the previous government’s own research suggests a majority of leaseholders are unlikely to be in favour of.

“The RFA has long called for responsible and proportionate reform of the leasehold sector, which is the most effective way of helping leaseholders and providing more good quality affordable and professionally managed housing. This includes introducing mandatory regulation of managing agents, as recommended by Lord Best in 2019, which will drive up standards for homeowners.”

Timothy Douglas, head of policy and campaigns at Propertymark, added: “Further reforms to the leasehold system will be welcome news for leaseholders up and down the country. Propertymark has long campaigned for changes to make it cheaper and easier to buy, sell and rent leasehold property. 

“We know that there are complications and additional costs with extending leases and property with an escalating ground rent struggles to sell, so commonhold offers an opportunity to tackle these issues. 

“With 42% of Propertymark member agents favouring abolishing the leasehold system altogether, it’s clear to see there is frustration with the current system. However, understanding and awareness of the implications of commonhold is low. What’s key through the white paper proposals is that any future changes make the system simpler, reduce costs and enable consumer confidence.”