The leasehold system in England and Wales has long been criticised for its complexity and unfairness, particularly for homeowners facing escalating ground rents, high service charges, and costly lease extensions. In response, the government is introducing sweeping reforms aimed at creating a fairer property ownership framework. These changes will significantly impact leaseholders, freeholders, and future homeowners, with a shift towards commonhold ownership as a viable alternative.
The End of New Leasehold Houses
One of the most significant reforms is the ban on the sale of new leasehold houses, except in exceptional circumstances. This means that developers will generally sell newly built houses as freehold properties, granting buyers outright ownership of both the property and the land it stands on. This change aims to put an end to the controversial practice of developers selling houses as leasehold properties, which often led to homeowners being burdened with rising ground rents and restrictive covenants.
Reviving Commonhold Ownership
The government is also looking to reinvigorate the commonhold system, which allows homeowners to own their individual flats outright while collectively managing shared areas through a commonhold association. Unlike leasehold, commonhold ownership does not require lease extensions, nor does it involve ground rents or a third-party freeholder. The reforms seek to make commonhold a more attractive and practical alternative for flat ownership, giving leaseholders greater control over their properties and reducing disputes over management and service charges.
Lease Extensions and Freehold Purchases
Under the new legislation, leaseholders will benefit from a simplified and more cost-effective process when extending their leases or purchasing their freeholds. Key changes include:
- Extended Lease Terms – Leaseholders will now be able to extend their leases up to 990 years, a significant increase from the previous 50 years for houses and 90 years for flats. This will provide long-term security and eliminate concerns over lease expiry.
- Reduced Costs – Leaseholders will no longer cover the freeholder’s legal costs when extending a lease or purchasing a freehold, making the process more affordable.
These changes aim to remove financial and legal barriers that have historically made lease extensions and enfranchisement a costly and complicated process.
Easier Access to the Right to Manage
The reforms also strengthen leaseholders’ rights to take control of their building’s management through the Right to Manage (RTM) scheme. Key improvements include:
- Expanded Eligibility – More leaseholders, particularly those in mixed-use buildings, will be eligible to exercise the RTM.
- Cost Reduction – Leaseholders will no longer have to cover the freeholder’s legal expenses when claiming the RTM, making it a more accessible option.
This will enable leaseholders to take direct responsibility for managing their buildings, ensuring better service quality and value for money.
Greater Transparency in Service Charges and Insurance
Service charges and building insurance premiums have long been a source of contention for leaseholders, often shrouded in opacity and prone to excessive costs. The proposed reforms will introduce greater transparency by:
- Requiring landlords to provide clear and detailed breakdowns of service charges – This will help leaseholders understand and, where necessary, challenge unfair costs.
- Addressing hidden insurance commissions – The government is considering a ban on undisclosed commission arrangements between insurers and freeholders, which inflate building insurance premiums.
These measures will ensure that leaseholders only pay fair and justifiable costs for the maintenance and management of their properties.
When Will These Changes Take Effect?
Some reforms have already been enacted, and others will gradually take effect over the coming years. The government has committed to publishing a draft Leasehold and Commonhold Reform Bill in the second half of 2025, which will undergo consultation and parliamentary scrutiny before becoming law.
A Fairer Future for Homeowners
These reforms represent a major shift in property ownership, addressing longstanding issues within the leasehold system and offering leaseholders greater rights and protections. By phasing out new leasehold houses, simplifying lease extensions, making commonhold a more attractive option, and improving transparency in service charges, the government aims to create a property market that is fairer, more affordable, and more sustainable for future generations.
For leaseholders, these changes offer long-overdue relief from excessive charges and restrictions, while promoting greater autonomy over their homes. As these reforms take shape, homeowners and prospective buyers will need to stay informed about how the new rules will affect their rights and financial commitments in the evolving landscape of property ownership in England and Wales.
Navigating the Leasehold Reforms with 360 Law Services
At 360 Law Services, we understand the impact these changes will have on homeowners, leaseholders, and property developers. With the upcoming reforms in the leasehold system, our team of expert legal professionals is equipped to provide guidance and support during this transition. Whether you are a leaseholder navigating the complexities of lease extensions, considering a freehold purchase, or looking to explore the benefits of commonhold ownership, 360 Law Services can offer tailored legal advice.
