Today, the government has unveiled plans to make commonhold – where flat owners fully own their homes – the default form of ownership in the UK in a bid to end the “feudal” leasehold system
The government has announced a major shakeup to the leasehold system which will impact millions of homeowners.
Today, the government has unveiled plans to make commonhold – where flat owners fully own their homes – the default form of ownership in the UK in a bid to end the “feudal” leasehold system. Currently, the majority of properties in the UK are either freehold or leasehold.
If you buy a freehold property, you will be buying both the building and the land – so you own both outright and are responsible for them. Your ownership is also unlimited.
If you buy a leasehold home, you own the property but not the land on which it sits. Flats often tend to be leasehold as third-party landlords control the overall building they are in. Often, owners of these properties have to pay ground rent and service charges on top of their mortgage. Over the last few years, these extra costs have skyrocketed, and millions have struggled to cover them. Due to the onerous lease terms, homeowners have been unable to sell their homes and feel “trapped” in their current home.
The government has confirmed that it will launch a consultation this year to ban new leasehold flats. A Leasehold and Commonhold Reform Bill will set out a legal framework for change. A new Commonhold Code of Practice will also set out clearer rules on building costs and maintenance, giving homeowners more “control and transparency”.
The changes will give flat owners the power to make decisions on building management and how money is spent. The changes will also make it cheaper and easier for existing leaseholders to buy their freehold, challenge unfair service charges, and take control of building management, as homeowners will be able to hire and fire managing agents.
Housing and Planning Minister, Matthew Pennycook said: “This government promised not only to provide immediate relief to leaseholders suffering now but to do what is necessary to bring the feudal leasehold system to an end – and that is precisely what we are doing.
“By taking decisive steps to reinvigorate commonhold and make it the default tenure, we will ensure that it is homeowners, not third-party landlords, who will own the buildings they live in and have a greater say in how their home is managed and the bills they pay.
“These reforms mark the beginning of the end for a system that has seen millions of homeowners subject to unfair practices and unreasonable costs at the hands of their landlords and build on our Plan for Change commitments to drive up living standards and create a housing system fit for the twenty-first century.”
Some of the changes set out in the white paper include:
- New rules that will let commonhold to work for all types of developments, including mixed-use buildings and allowing shared ownership homes within a commonhold
- Greater flexibility over development rights, helping developers build with confidence and maintaining safeguards for the consumer
- Giving mortgage lenders greater assurance with new measures to protect their stake in buildings and protect the solvency of commonholds – such as mandatory public liability insurance and reserve funds and greater oversight by commonhold unit owners to keep costs affordable
- Strengthening the management of commonholds, with new rules around appointing directors, clear standards for repairs, and mandating use of reserve funds
- Providing an enhanced offer for homeowners – including requiring greater opportunities for democracy in agreeing the annual budget, clarifying how owners may change “local rules” over how a building is run and new protections for when things go wrong
A draft Leasehold and Commonhold Reform Bill will be published later this year. The government says progress will be made “as quickly as possible” to make it cheaper and easier for leaseholders to buy their freehold or extend their lease and to challenge unreasonable service charge increases.
