Government Announce Plans to Require Commonhold for New Builds

The Government recently announced plans to abolish leasehold property, requiring all newly-built apartments to be commonhold instead.

Why does the Government want to change leasehold?

Owning a leasehold property is different to owning freehold property. A leasehold property owner has the right to live in a property for a set number of years, depending on the length of the lease.

Leasehold properties are usually flats or maisonettes within a larger property, owned by a freeholder. The leaseholder will usually also pay ground rent and service charges to the freeholder to cover the maintenance of the building.

Leaseholders often have little say in these charges and in how the property is maintained and run, and ground rents can often be expensive.

It is possible for a group of leaseholders to purchase the freehold of their building, but this is somewhat rare.

Read more:

What are the risks in buying a leasehold property?

How is commonhold different?

Commonhold has existed since the Commonhold and Leasehold Reform Act in 2002, but remains rare. A commonhold owner owns their property outright, forever, with no lease ticking down.

A commonholder also owns a proportionate share of the building where their property is located, along with other commonholders, who act as a group or "commonhold association". There is no ground rent to pay, and decisions about building maintenance and repairs are made jointly.

Why now?

Abolishing leasehold property has been discussed for a long, long time.

Historically, there's been considerable resistance to changing the current system, from freeholders, property builders and some lenders.

Although leasehold property purchases are more complex than freehold purchases, commonhold is yet more complex, and many solicitors are unfamiliar with the legal issues involved.

The previous Government placed restrictions on what ground rent could be charged on new build leasehold property, as some property builders had begun to impose onerous ground rent charges on new flats.

With growing public interest and cross-party support, the current Government intends to take a big step further, making commonhold the default for new apartments.

The aim is to give homeowners more control, and to make the ownership of property in a shared building simpler and fairer.

How do the plans affect leasehold buyers?

In the short term, leasehold purchases will proceed as before. The planned changes are also unlikely to immediately apply to existing leasehold properties.

If the changes are implemented for new build flats, conveyancing solicitors will need to get familiar with the legal process for commonhold purchases, which could lead to process delays.

Given how long these issues has been discussed, it's unlikely that the ownership of existing leasehold property will significantly change for the foreseeable future.