The Lead Untangles: Changes to the 'feudal' leasehold system and whether they go far enough
Ella Glover writes for The Lead on plans to end ‘unfair practices and unreasonable costs at the hands of landlords’
At a glance facts
The government has committed to abolishing the leasehold system in one parliament in a new white paper published Monday. It comes after campaigners have waited more than four years for promised reforms to the “feudal” leasehold system, which—at its worst—traps homeowners in dangerous properties with spiralling maintenance costs.
The government has promised to make commonhold the default tenure for homeowners moving forward, eventually banning the sale of new leasehold properties altogether and allowing current leaseholders to convert to commonhold.
Monday also saw long-awaited reforms ushered in, namely an adjustment to the non-residential threshold for leaseholders to claim the Right to Manage (RTM). RTM allows leaseholders of flats to take over the management of their building from freeholders, as long as 51% are in favour of doing so—however, this was only previously available to leaseholders living in developments where non-residential parts of the building did exceed 25% of the total floor area. Under the new law, that gap has been increased to 50%. Leaseholders will also be exempt from paying for the freeholder’s legal expenses during RTM claims.
Matthew Pennycook, Housing and Planning Minister, said: “These reforms build on the government’s Plan for Change to deliver higher living standards and 1.5 million safe and decent homes in this Parliament, and our ongoing efforts to protect leaseholders suffering from unfair and unreasonable practices as we work to end the feudal leasehold system for good.”
Context
Leasehold is a form of home ownership which exists only in England and Wales. There are an estimated five million leasehold properties in the two countries, 70% of which are flats. Although people who own leaseholds are seen as homeowners, they are technically locked into a very long rental contract. Those who own flats don’t own the ground underneath it; they have the right to live on the land for 999 years, but have historically had to pay ground rent to third-party landlords known as freeholders.
Leaseholders often have little say about how their building is managed and maintained. In recent years, scandals of soaring and spiralling maintenance costs (for work that never gets done), dangerous cladding and untenable ground rents have abounded.
Michael Gove, then the Conservative Housing Minister, promised leasehold reform in 2020, and since then changes have been made in dribs and drabs. Ground rents were banned for new leasehold homes by the Leasehold Reform (Ground Rent) Act 2022, but the government is yet to extend this to current leaseholders.
Last year, Labour committed to ending the leasehold system in the King’s Speech, by: banning the sale of new leasehold flats so that commonhold becomes the default tenure; bolstering leaseholder rights by making further changes to the leasehold enfranchisement and the right to manage systems; regulating ground rent; ending the injustice of “fleecehold” private estates; and ending forfeiture as a remedy for landlords when a residential leaseholder falls into ground rent arrears.
What does leasehold reform actually do?
The government has promised to upend the leasehold system completely, replacing it with the more widely utilised commonhold.
Under a commonhold system, people who own property will be able to own the freehold of individual flats, houses and non-residential units, while those living in a shared unit (such as a block of flats) will jointly own and manage the common areas, known as a commonhold association. This would give those who live in the building more freedom over maintenance and should, in theory, bring down hefty service charges and ensure a better service is offered overall.
What is the left saying?
The Green Party has previously promised to abolish leasehold in favour of commonhold. In 2023, Co-leader Carla Denyer said: “People feel trapped in their own homes by a form of ownership that loads them with rising, uncapped costs and gives them no say in how their properties are maintained or repaired…
“By abolishing leasehold in favour of ‘commonhold’ – a system widely used in other countries – we would democratise ownership and allow people to make joint decisions about what should happen in shared areas of flats and housing complexes.
“People could come together and choose their own management company, set their own service charges and take control of decisions around where they live.”
What is the right saying?
Shadow housing minister criticised the government for failing to address the issue of current leaseholders, instead choosing to ban new leaseholds. “Another broken promise,” he said. “Labour promised to end the feudal Leasehold system for good. But today the Housing Minister rowed back.”
You would be hard pressed to find what Reform UK has said on this issue. However, it’s worth noting that the previously party wanted to abolish the Renters (Reform) Bill, which protected tenants from no-fault evictions, citing belief that the existing laws were strong enough.
Short of silence from Reform UK - who you sense might believe they have other priorities - this is more a conversation about who can tackle the issue more effectively.
What happens next?
Campaigners have criticised the government for not going far enough, and there are fears that the legislation as it stands will create a two-tier system where current leaseholders are left trapped in the current system. Katie Kendrick, a spokeswoman for the National Leasehold Campaign, said: “The White Paper is a significant step forward and is the beginning of the end for the feudal leasehold system. While focusing on preventing future leasehold abuses is crucial, it’s equally vital to address the plight of existing leaseholders currently bound by the inequitable leasehold system.
“Commonhold conversion mechanisms are essential to offer an escape route for those trapped, alongside tackling issues like existing ground rents, reforming the valuation process for enfranchisement and regulating managing agents. Ensuring these existing issues are resolved alongside the move to Commonhold will ensure a fairer and more equitable housing landscape for all flat owners.”
The government has committed to making commonhold conversion easier, but has not said how or when that will be possible. It said that a Leasehold and Commonhold Reform Bill, including the detail of how the new system would work, will be published later this year.
About The Lead Untangles: In an era where misinformation is actively and deliberately used by elected politicians and where advocates and opposers of beliefs state their point of view as fact, sometimes the most useful tool reporters have is to help readers make sense of the world.
The Lead Untangles is delivered each Friday by The Lead and focuses on a different complex, divisive issue with each edition.
About the author: Ella is a freelance journalist specialising in worker's rights, housing, youth culture, social affairs and lifestyle. You can find her work in Tribune Magazine, Huck Magazine, Novara Media, VICE, Dazed, metro.co.uk and - most importantly - here at The Lead.