Leasehold Flats Ban with Move to Commonhold

A new Leasehold and Commonhold Reform Bill for England and Wales is currently being drafted with the aim of banning all new leasehold flats/apartments and only allowing Commonhold.  The government suggests this will bring the UK into line with how most other countries apartment blocks are owned and managed.  (This was actually started by the Conservative Government in 2023 but not completed by the election).

Let’s Understand Property/Land Ownership

• The Monarch owns all the land in England and Wales.  King Charles owns the land.
• Through the centuries, going way back to and before ‘Knights in Shining Armour’, the Monarch of the Day granted rights to land and estates to people in favour as freeholders with no rents to pay to the Monarch.
• Freehold, you own the rights to use the land in perpetuity.
• A property/home or a collective set of homes/flats/apartment is built on the land.
• Usually you buy the land when you buy your single property/house – you are now the freeholder of your land.  Sometimes you do not buy the land and so you have a leasehold house.
• Leasehold (collective property such as an apartment/flat), each property is usually granted a lease to use their property for a period of time e.g. 125 years but more commonly now 999 years.
• Leaseholders usually pay a service charge and/or ground rent to the freeholder for maintenance and running costs etc.
• You can extend the lease but when the lease ends, the property and land reverts to the freeholder.
• Many apartments blocks today have each apartment owner having a share in a limited company (management company) that also owns the freehold, so indirectly each apartment owner owns a share in the land and with a lease granted by the freeholder (the management company that they also own).  This is Commonhold.
• Commonhold, as stated above, is where you own your apartment via leasehold and your also own a share of the land collectively with other shareholder/apartment owners.
• It has been estimated that over 5m properties in England and Wales are leasehold without any freehold/commonhold ownership. 

Abuse of Leasehold

There have been many instances where leasehold owners have seen their service charge/ground rent charges dramatically increased by the freeholder/management company with no powers to stop/adjust/vote on the increase.  This is what the government is acting on by:

• Banning ‘new build’ leaseshold apartment blocks and only allowing new commonhold buildings.
• Plans to make it easier for groups of existing leaseholders to buy the land upon which their apartments have been built on to also create a commonhold where you own your apartment and owners collectively own the land.

Comment

This is great news and should make apartment ownership more stable in that there will not be separate freehold landlords that can increase fees with little explanation.  As a commonholder, you have a vote in what service charges are set at and what is done with the common/communal areas.

We are very much interested in how they will legislate to make it easier for existing leaseholders to collectively buy their freehold as this is the key to stable ownership in apartment blocks.