The government says its radical shake up of the leasehold system will involve “greater assurance” to mortgage lenders. 

Housing Secretary Angela Rayner’s Ministry of Housing, Communities and Local Government says in future buyers of flats in particular will have a stake in the ownership of their buildings from day one, not have to pay ground rent, and will gain control over how their buildings are run.

This will be via commonhold becoming the default tenure – a shift away from leasehold where third-party landlords own buildings.

Under the current system, leasehold ownership hands the homeowner the right to occupy land or a property for a set period which reverts back to the freeholder once this expires. 

It means leaseholders don’t own their property outright, are forced to pay potentially escalating ground rent costs in some cases, and have a landlord who determines how the building is run and determines service charges the leaseholder must pay.  

According to the Hamptons lettings agency the amount of money leaseholders pay for communal maintenance and services in their building has risen by 11% in England and Wales between 2023 and 2024 to an average of £2,300.

Commonhold ownership allows people to 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). 

This “rulebook” establishes how the shared areas and facilities will be managed, maintained and funded, as well as the obligations for each person. It establishes a democratic system of decision-making and helps prevent disputes.  

Each property owner will become 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, including the power to hire and fire them.   

Through the commonhold association, 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 including adopting ‘local rules’ – specific to how they and their neighbours in the same block of flats want to live.   

A government White Paper released this week says the transition to the new default tenure will involve “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.”