A big moment for commonhold

Posted: March 6, 2025 | Author: julesbirch | Filed under: Commonhold, Leasehold |Leave a comment

Originally written as a column for Inside Housing.

England and Wales have a long history of trying and failing to introduce commonhold and an even longer one of trying and failing to reform leasehold. 

So this week’s white paper is a big moment, coming 60 years after Labour first pledged commonhold and 23 years after it botched its implementation.

After decades of frustration and failed attempts at reform, leaseholders will have to be patient for a little bit longer and take the housing minister at his word that this is ‘the beginning of the end for leasehold’. 

While some have criticised Labour for going too slowly, the white paper highlights the flaws in previous legislation and the importance of getting things right. 

So there will be both a draft Bill setting out how the existing commonhold framework will be amended and a further consultation on banning leasehold for new-build flats before all the pieces can be put into place.

Commonhold was first introduced in England and Wales in 2002 to bring them into line with what has been the default for at least 50 years in much of the rest of the developed world. 

But the system has been used in fewer than 20 developments in more than 20 years, with the white paper arguing that the 2002 legislation was ‘not fit for purpose and has held commonhold back’.

It draws on Law Commission recommendations to make commonhold more flexible so that it can be used for everything from a house divided into a couple of flats to a large development of flats, offices and shops.

This will mean that a building or estate can be divided into different commonhold ‘sections’ to ‘separate out the management of different areas or groups of units within a commonhold’

Commonhold should make it easier and cheaper to make changes to a building where the majority of owners agree and offer advantages even over flats sold with a share of the freehold since changes to those will still require expensive amendments to the lease.

Most pertinently for the housing sector, it will also mean doing something about shared ownership, since leases of more than seven years are not allowed under the existing form of commonhold. 

But in the wake of the problems exposed by scandals over leasehold and building safety, especially with blocks acquired under Section 106, that is well overdue.

Whether reform can address the complaints of existing shared owners very remains to be seen, though. 

The white paper proposes a solution for ‘new model’ shared ownership under which the registered provider would have a vote on decisions relating to repairs for the 10-year period of the Initial Repair Period. 

However, a footnote adds that: ‘It is important to note that here we are setting out how new shared ownership units will operate in newly built commonhold blocks. We are still considering how shared ownership will operate in existing buildings which have been converted into a commonhold.’

That leaves a massive issue – what happens to shared ownership blocks built before 2021 – unresolved. 

One of the fundamental problems with the tenure – that you no matter the size of your share you are liable for 100 per cent of the service charges – will remain and so will the looming one of the two-tier system created by restricting reform to the new model.

For the housing market as a whole, though, the key problems are how to convert existing freeholds to commonhold and how to stop any new leaseholds being created. 

On the first, while recent leasehold reforms make it cheaper to acquire a lease, the cost could still be significant and not all owners may agree.

The government rejects the idea of equity loans for such ‘non-consenting leaseholders’ and favours finding a way to adjust their leases ‘to align the new commonhold rules as far as possible’. 

On the second, the white paper says that ‘we can see few reasons’ why new build flats ‘should not be provided as commonhold from the outset’.

However, another consultation will follow and it adds that: ‘We see having a viable commonhold model as the essential first step towards the development of a ban, so we will not ban the use of leasehold until we are confident that a viable alternative, through reformed commonhold, is in place.’

With the 1.5 million homes target in mind, there will also need to be ‘arrangements to ensure a smooth transition and protect the delivery of new, much needed supply’. 

All this represents substantial progress and if the government really can introduce it all before the end of the parliament it will be a significant achievement. 

However, it also shines an unforgiving spotlight on the failures of the past. Leasehold could have been abolished in England and Wales long ago rather than leaving them as the only developed nations that still have it as a fundamental part of their housing system.

Had this been done in 1965 or even 2002, we would not have had the scandals of new homes sold with doubling ground rents or flats with unaccountable service charges.

We would still have had a building safety crisis, and someone would still have had to pay to fix it, but we would not have had the toxic interaction between cladding and leasehold. 

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