The end of leasehold flats: what it means for landlords and property owners
Key Points:
- Property law expert explores the government’s plan to ban new leasehold flats and transition to a commonhold system
- Expert discusses the potential devaluation of leasehold properties and disruptions to the traditional leasehold-based business model, while also highlighting the complexities of commonhold ownership
- Expert explains that the transition to commonhold will be complex, but that in the long-term, it could herald a fairer property market
The leasehold system in England and Wales is on its way out—at least for new builds. In a move that has sparked both celebration and concern, the government is moving forward with plans to ban the sale of new leasehold flats and shift towards a commonhold model.
“While this is a win for those leaseholders who are tired of unpredictable service charges and lack of control, landlords and property owners are bracing for a sea change in how they manage their investments,” says Alex Cook, head of property litigation at Helix Law, a UK-based law firm specialising in complex litigation and dispute resolution.
Below, Alex discusses the impact of this new move and the potential of further government moves to convert current leasehold properties to the commonhold structure.
A Blow To Traditional Landlords?
For years, freeholders—often large property companies—have reaped the benefits of managing multi-flat buildings by setting service charges and collecting ground rent. The government’s move to scrap leasehold flats in favour of commonhold arrangements raises significant concerns for these stakeholders.
“One immediate impact is the potential devaluation of leasehold properties,” says Alex. “With new leasehold flats off the table, existing leasehold flats could become harder to sell, especially if commonhold alternatives become popular.”
Additionally, property management companies, many of which operate through leasehold structures, could face major disruptions.
The Commonhold Conundrum
“While commonhold flats offer residents more autonomy, they also come with increased financial and legal responsibilities,” says Alex. “Instead of deferring to a freeholder, residents of commonhold flats have to work together to manage their buildings, which can lead to disagreements over maintenance costs and budgets.”
Critics argue that running large apartment complexes without an overarching authority could be challenging, especially for those without the time or expertise to manage communal finances. The government, however, believes the shift to commonhold will put power back into the hands of homeowners, allowing them to decide how their properties are managed and how much they pay for upkeep.
Alex Cook, head of property litigation at Helix Law, commented:
“The leasehold ban is undoubtedly a major shake-up for the property industry. While commonhold aims to empower homeowners, transitioning from the current system will be a long and complex process, and the government has yet to outline clear plans for converting existing leaseholds to commonhold, leaving millions of current leaseholders in limbo.
“Additionally, while commonhold eliminates ground rent and service charge disputes, it introduces new challenges, such as who takes responsibility for major repairs, and how disputes between neighbours will be resolved. It will definitely be interesting to see how popular this style of joint property management becomes.
“For landlords and property investors, this move forces a rethink. Freeholders may look to shift their business models, while leasehold flat owners could find themselves struggling to sell.
“In the short term, uncertainty looms, but in the long run, the hope is that the property market becomes fairer and more transparent for all. As the government drafts the Leasehold and Commonhold Reform Bill, one thing is certain—this is a defining moment for property ownership in England and Wales. Whether it levels the playing field or creates new complexities remains to be seen.”
