The government has issued a series of consultations to reform the controversial leasehold system of property ownership in the UK but large freeholders are now attempting to scupper the changes.
Currently, the default tenure for new-build homes, particularly flats, is leasehold, but rising ground rents and unregulated service charges have made it harder to sell these properties – affecting house prices – and mortgage lenders have been more cautious about lending against them.
Ministers have vowed to bring the feudal leasehold system to an end and overhaul how people own their new-build homes and common areas.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Get 6 issues free
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
But many of the changes are taking longer than expected as the Labour government has decided to consult on many of the changes to fill what it says are gaps left from the legislation of the previous Tory government.
Freeholders have also launched a legal case calling for a judicial review of the reforms, claiming changing how leasehold extensions work will impinge their human rights.
The Labour government promised to finish off leasehold reforms when it came to power in July 2024.
The King’s Speech mentioned the Leasehold and Commonhold Reform Bill that promised to “bring the feudal system of leasehold to an end".
Reforms include banning new leasehold flats, making commonhold the default housing tenure and capping ground rents as well as making it easier to understand and challenge service charges.
But work will only start on the legislation after a series of consultations on the changes.
Service charge transparency
Many leaseholders complain that it is unclear what their service charges are covering and if they are paying a fair rate for repairs.
The government has launched a consultation to seek views on new standardised service charge demand forms, annual reports, service charge accounts and administration charges.
These would spell out clear and detailed information about how service charges are calculated and spent.
The consultation closes on 26 September 2025.
Moving from leasehold to commonhold
The government released a white paper in March 2025 to discuss ways of shifting to a commonhold form of property ownership to replace leasehold.
Currently, most new-build developments are owned under a leasehold system.
This gives the homeowner the right to occupy land or a property for a set period which reverts back to the freeholder once this expires.
The value of the property can drop and it can be hard to get a mortgage when the lease term gets lower unless property owners pay high sums to extend it or buy the freehold.
The argument for leasehold is that it makes cheaper to buy a property as it excludes the price of the land while the owner doesn’t have to worry about maintaining the common areas.
But critics have said this means leaseholders don’t own their property outright and have been forced to pay potentially escalating ground rent costs in some cases, while unknown landlords and property managers can set their own service charges and often neglect buildings.
In contrast, commonhold ownership lets buyers fully own their property outright, with no expiring term or need to save to extend a lease.
They can have a say in managing their building and have the benefit of not needing to pay ground rent or have a third-party landlord.
There are no leases, with the rights, responsibilities and rules for all property owners set out in the Commonhold Community Statement (CCS).
Each property owner becomes part of a commonhold association upon buying their home, which oversees both the governance and management of the building unless it decides to bring in a managing agent – which will be accountable to the commonholders, not to a landlord.
Commonhold homeowners will have a vote on the annual budget, which is for upkeep and for maintenance of the building, and on the charges they have to pay – equivalent to what service charges are used for under the current leasehold system.
Homeowners will also be able to effectively plan for longer-term repairs or maintenance under commonhold, and vote on issues that affect them.
This system has previously been recommended by the Law Commission and is popular in Europe, New Zealand, Australia, the US and other parts of the world.
The shift has been broadly welcomed but industry insiders warn it won’t be easy to make the transition.
Scott Goldstein, a partner at law firm Payne Hicks Beach, said: “The concern is to make sure that the system is ready to cope.
“Lenders must be encouraged to give mortgages to purchase flats held on commonhold.
“There must be robust financial controls in place to ensure commonhold blocks have the resources they need to manage their properties.
“Finally, as commonhold blocks are always run by property owners, many more of us will be involved in property management.
“The government needs to provide easy to follow resources to educate and train all of us about the rights and responsibilities of commonhold."
Will this help current leasehold homeowners?
Banning the sale of new-build leasehold flats, once introduced, will help buyers in the future, but activists warn that the existing 5 million leasehold property owners still need support.
In recent weeks, the government has removed the two-year time period that property owners previously had to wait to extend their lease.
Leaseholders also no longer have to pay a freeholder’s legal fees when making a right to manage claim to take over the running of a development.
But it is still unclear when changes will be made on valuing lease extensions and previously promised ground rent caps.
Katie Kendrick, founder of the National Leasehold Campaign, said: “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.”
Nine freeholders and landowners, including the ARC Time Freehold Income Authorised Fund, The Cadogan and Grosvenor Group, Long Harbour, Albanwise Wallace, John Lyon’s Charity and The Portal Trust are calling for a judicial review of the changes.
Between them, the claimants own the freehold interest in more than 390,000 leasehold flats and houses across England and Wales.
A four day hearing in the Divisional Court started on 15 July and will consider calls for a judicial review.
The group is challenging the removal of the requirement on leaseholders with leases of less than 80 years to pay 50% of the marriage value to the freeholder.
They are also challenging the exclusion of ground rents of more than 0.1% of the freehold vacant possession value from being included in the calculation of the price payable for a lease extension and are unhappy with the removal of the requirement for the leaseholder to pay the freeholder’s costs of an extension.
Leasehold activists are not happy with the claim, unsurprisingly, especially as many of those involved are wealthy landowners.
This includes the Duke of Westminster’s Grosvenor Estate and the Earl of Cadogan’s Cadogan Estates.
The Leasehold Knowledge Partnership charity campaign group warned that the court process will be “expensive and long drawn out,” warning that there will be no real progress on leasehold reform until this case is resolved.
The National Leasehold Campaign said: "Whilst the lawyers fight this out in the courtroom, leaseholders are nervously awaiting the outcome. There is a real human impact that cannot be underestimated. Time will tell if justice will be served, but in the meantime, leaseholders remain in a state of limbo, trapped by this iniquitous system, with no way out. This really is a David vs Goliath battle.
“For too many years, leaseholders have been exploited by feudal leasehold laws which are not fit for the 21st century. It cannot go on. The current status quo must not be maintained, and this is the opportunity for meaningful change. Leaseholders deserve better.”
Inheritance tax investigations catch out 1200 more families in HMRC crackdown
Bank of England expected to cut interest rates despite sticky inflation
