Commonhold reform: ‘a step forward but caution required in wave of property law reforms’

Property law expert Ian Morgan said the move forms part of a wider package of reforms which will impact on owners and occupiers of residential, commercial and mixed-use property in England and Wales.

“As the first shoots of spring appear, the government is pressing ahead with various aspects of its property law reforms,” Morgan said.

“In the commercial property sector, the Law Commission has just finished consulting on reforms to Part 2 of the Landlord and Tenant Act 1954, which gives commercial tenants the right to renew their lease at the end of their contractual term,” Morgan said. “Various so called ‘models’ have been proposed, ranging from full abolition of the Act to mandatory security of tenure. This consultation has now closed and following analysis of stage one, the Law Commission is expected to put forward its recommended model along with a request for further, detailed, feedback in due course.”

“In the residential sector, there is a legislative triad ongoing. First, the House of Lords has been focusing on the Renters Rights Bill, which is set to end so-called ‘no fault’ evictions. Second, there have also been steps forward in the implementation of the Leasehold and Freehold Reform Act, which was the last piece of legislation implemented under the last government during the pre-election parliamentary ‘wash-up’. However, there are judicial reviews ongoing, and the government has indicated that various aspects will be delayed. With further legislation needing to be made to implement various parts, it is looking increasingly unlikely that further major implementation steps can take place until the autumn at the earliest,” he said.

“In addition, we now have the long awaited commonhold white paper, which promises the end of leasehold homes, with homeowners to have a stake in the ownership of their buildings and more control over how their buildings are run. With those perceived benefits also comes the potential burden of various legislative and regulatory duties and it will be important for all involved to be clear on who is to ‘carry the can’ on issues such as fire safety and regulatory compliance. The focus must be on getting the balance right and it is recognised that it will take hard yards in order to achieve that. It is a busy time for property law reform and businesses in the market are advised to monitor the progress being made,” Morgan added.

The new commonhold white paper contains plans for what the government described as “a comprehensive new legal framework for commonhold property” in England and Wales.

Commonhold is a form of freehold property ownership, which enables individual apartments, or ‘units’, within a building or larger development to be owned on a freehold basis. The government wants to encourage a shift to a commonhold ownership model after identifying problems with the leasehold model, which is in operation for most flats in the jurisdiction currently.

“At the heart of the commonhold model is a simple principle: the people who should own buildings, and who should exercise control over their management, shared facilities and related costs, are not third-party landlords but the people who live in flats within them and have a direct stake in their upkeep”, said Matthew Pennycook, minister for housing and planning, in his foreword to the white paper. “In enabling flats to be owned on a freehold basis, commonhold ensures that the interests of homeowners are preserved in perpetuity rather than their value depreciating over time as it does under leasehold, and it transfers decision making powers to homeowners so they have a greater say over how their home is managed and the bills they pay, as well as flexibility to respond to the changing needs of their building and its residents.”

The government said commonhold-type models are prevalent elsewhere in the world and its white paper set out not only how it intends to reinvigorate the concept in England and Wales – the model previously failed to establish itself in the market despite the Commonhold and Leasehold Reform Act being introduced for that purpose in 2002 – but how it wants to achieve that by largely although not completely implementing recommendations made by the Law Commission of England and Wales in a report in 2020.

As part of the planned shift to commonhold-type ownership models, the government said it intends to ban the sale of new flats on a leasehold basis “to ensure that commonhold becomes the standard tenure”. However, it said it would not do so “until we are confident that a viable alternative, through reformed commonhold, is in place”. It intends to consult on the proposed ban later this year.

The white paper proposals were outlined on the same day that certain provisions under the Leasehold and Freehold Reform Act 2024 were brought into force. Those rules include those that will have the practical effect of giving more leaseholders rights to manage more mixed-use buildings, as well as new rules relating to the costs of right to manage claims.

The commonhold reforms also supplement measures already being implemented under the Leasehold and Freehold Reform Act 2024. On 31 January 2025, new regulations came into force and ‘switched on’ Section 27 of that Act. These changes abolish the two-year ownership requirement for leaseholders to extend their lease or purchase the freehold under the Leasehold Reform Act 1967 and the Leasehold Reform Housing and Urban Development Act 1993.

Other elements of the Leasehold and Freehold Reform Act 2024, however, are subject to ongoing judicial review. Morgan said that, with the potential for appeal of any High Court decision on judicial review – with the cases proceeding to a full hearing over the summer, it is likely to be late 2025 or even well into 2026 before developers, investors, funders, landlords and tenants start to get a degree of clarity, without a change of path.