Path is set to kill off leasehold and replace it with commonhold

It really looks like it is going to happen. The death knell of leasehold has been sounded and government is determined to finish it off. Commonhold is going to become the default tenure for flats and creating new leasehold ones will be banned.

This time we actually think that this will happen.

Last Monday the White Paper on commonhold was published, making short, sharp points explaining that the unarguable failures of leasehold demonstrated that commonhold was needed, and explained in some detail how it would work. (The ministerial forward provides a good resume.)

On Tuesday housing minister Matthew Pennycook addressed the All-Party Parliamentary Group on leasehold and commonhold reform, delivering a determined message that commonhold will become the default system of tenure. If it doesn’t then the government will have “failed”.

There were no prevaricating sub-clauses about “some good landlords”, “leasehold working for many”, or weasily cliches such as “unintended consequences” and “be careful what you wish for”, which we have heard so many times from politicians in the past.

It is a given that leasehold involves unacceptable exploitative practices and falls short of true home ownership, and its time is up.

Mr Pennycook stated that a commonhold reform Bill will be published early later in the year in order to ensure the widest engagement with MPs in the housing select committee, flat owners, housebuilders and assorted professionals whose efforts will be needed to make this change in land tenure work.

He told the APPG: “On commonhold I think it’s worth saying …if commonhold is just seen as an alternative to leasehold and not the preferred alternative, not a radical improvement on leasehold, then I think we will have failed.”

Key for commonhold to succeed is to end the possibility of more mass leasehold:

“If we hadn’t made the policy choice that we have – beyond the Law Commission’s recommendations – to ban new leasehold flats I don’t think commonhold would take root.”

Mr Pennycook said that he had not encountered resistance from housebuilders to the move to commonhold and described their attitude towards it as “essentially agnostic”. Further, he stressed that their co-operation in advancing commonhold would be essential.

But he also addressed the biggest impediment facing the reforms: the judicial review granted to freehold owners in January to challenge the government over the 2024 Act that will be heard in the high court in July.

“The vested interests that want to see no reform in this area are incredibly powerful,” said Mr Pennycook.

“We have to proceed with caution. We have to make sure that when it comes to legislating and introducing policy, things are as watertight as possible.”

About the legal challenge by freehold owners, the minister said: “You can draw your own inferences for what that means for the implementation of the 2024 Act, but I won’t say anything more than that for understandable reasons.”

The enmity of freeholders is understandable, but what has clearly perplexed Mr Pennycook has been the highly critical response on social media to the reforms from supposedly a mass of leasehold activists.

In November when Mr Pennycook announced the schedule of secondary legislation to the 2024 Leasehold and Freehold Reform Act (LAFRA) he was met with a upsurge of anger and a betrayal narrative was advanced.

Those who argued that this was not justified, like LKP and the National Leasehold Campaign, were assailed by criticism – a good deal of it unusually vituperative and personal in tone. The achievements of both organisations in getting leasehold reform to this stage were trashed.

Scores of strikingly similar X / Twitter accounts accused Labour of having betrayed leaseholders by not “ending leasehold in 100 days”; that the government just needed “to switch LAFRA on”; that a full Parliament commitment to reform leasehold was a monstrous betrayal. LKP and NLC were simply Labour stooges and so forth.

The commonhold announcement was met with an apparent leaseholder outcry over concerns at the creation of a two-tier system – a genuine issue, but one being deployed by the freeholder lobby to thwart any reform of leasehold at all. It is a largely fictitious fear, in LKP’s view, as it is going to take some years – decades, in fact – for commonhold to become established, by which time the notion of having a third party investor leeching an income out of your home will seem as peculiar as leasehold does to numerous foreign nationals today living in London.

Mr Pennycook referred to this “carping” on social media at the APPG.

There is certainly genuine anger to government from leaseholders – especially those caught up in the never-ending post-Grenfell building safety disaster which blighted thousands of lives – but the most pointed and political criticisms were emitted from a co-ordinated PR campaign deploying scores of bogus Twitter accounts.

The existence of these accounts and a mass effort to manipulate social media – and deceiving real leaseholders – is attested by campaign groups such as the National Leasehold Campaign and Commonhold Now.

Of course, criticisms of government delivery – and of LKP and any other campaigners – is entirely legitimate.

But an orchestrated fury purportedly from massed leaseholders who in fact do not exist is another matter entirely.

Martin Boyd, LKP chair, is seeking an explanation from PR / lobbyist outfit Public First – among whose employees is respected economist Tim Leunig, who gave evidence to the LAFRA Bill committee in 2024 – why one of its employees appears to be exalting a social media barrage against government, the Leasehold Knowledge Partnership and the National Leasehold Campaign over reforms that the vast majority of leaseholders welcome and support.

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White Paper ministerial forward

“At the heart of the commonhold model is a simple principle: the people who should own buildings, and who should exercise control over their management, shared facilities and related costs, are not third-party landlords but the people who live in the flats within them and have a direct stake in their upkeep“

Matthew Pennycook: APPG speech highlights

Mr Pennycook thanked campaigners, “as we would not be here without your work”, welcomed the recreated APPG and praised MPs who, outside the APPG, have called in FirstPort and RMG property managers and for “holding their feet to the fire”.

Immediately after the ministers’ speech, APPG co-chairs were elected and they are: Joseph Powell (Labour), Amanda Hack (Labour) and Joshua Reynolds (LibDem), who join Neil O’Brien (Conservative).

Sebastian O’Kelly, of LKP the secretariat, paid tribute to former co-chair Mike Amesbury.

Background to banning leasehold

Matthew Pennycook said: “This government set out very clearly in its manifesto how it wanted to bring the feudal leasehold system to an end. Those commitments are there in black and white. They don’t include bringing it to an end in 100 days, just to be clear, and we were very open to about that fact prior to the election.

“We do set out … a very bold proposition essentially to bring the leasehold system to an end within a Parliament and to provide existing leaseholders with greater rights, powers and protections. And that is absolutely what we intend to do.

“We know that millions of leaseholders – and residential freeholders on private estates – are currently suffering as a result of unfair and unreasonable practices. We absolutely appreciate the need to urgently act to provide them with relief. But we are also cognizant of the complexity of the tasks.”

Why reforming leasehold is complex

“I heard yesterday [Monday 3 March 2025] certain commentators on the media saying conversion to commonhold is a really easy process, so let me assure you: it is not an easy process.

“We therefore have got to balance speed with care. We are absolutely determined to ensure that the reforms we pass will be watertight.

“I don’t need to tell many of you in this room who followed the progress of the Leasehold and Freehold Reform Act 2024 that that Act contains a small number – yes, only a small number – but a small number of, nonetheless, very serious flaws, which we now have to fix through primary legislation.

… “We are going to go as fast as we possibly can, but as slow as we need to ensure that we get this right.”

This involves turning on provisions of LAFRA through secondary legislation “in some cases, very complex and large pieces of secondary legislation”.

Mr Pennycook referenced the secondary legislation that has been passed – rent-charge arrears, building safety legal costs and the work of professional insolvency practitioners in July 2024; further building safety measures on 31 October last year; 31 January removal of two-year qualifying rule in relation to enfranchisement and lease extension; 24 February announced right to manage changes, including qualification to sites where 50% is commercial space from 25%, which came into force on 3 March.

Although Mr Pennycook referenced consultation on permitted insurance fee work, he did not discuss it.

He then addressed enfranchisement valuation rates. “This is going to be absolutely critical. The capitalization and deferment rate in the Leasehold and Reform Act are absolutely crucial to get right.

“I am not going to rush to that one. That needs to be absolutely belt and braces, so we’re going to consult quite extensively on that.”

On simpler measures such as service charge accounts schedules and on section 20 major works the government will launch a “technical consultation”.

“It’s not about whether we take the reform forward, but how we do it in the most effective way so that the system works for leaseholders.

“And so, I suppose, while I recognize very much the fatigue that is out there with consultations, and the general skepticism, I’d say, just judge us by our actions at the end of this Parliament.

“We absolutely are determined to do everything we say.

“But please provide us with that support and input on those consultations so that we can make sure we get the reforms right to the lasting benefit of leaseholders.”

Ending leasehold

Mr Pennycook said: “There are some good provisions, but the Leasehold and Freehold Reform Act is distinctly unambitious from my point of view and I said so repeatedly during its Commons stages in the last Parliament.

“There are a huge range of issues that we still need to address: unaffordable, unregulated ground rents; the draconian use of forfeiture as both a threat and in implementation … [and] we made a big step yesterday in publishing the Commonhold White Paper.

“Again, it is not a delaying tactic. If you look at the detail of that White Paper, there are some very difficult, complex issues we’ve got to wrestle with, not least conversion.

“But I think people can take heart from the fact that, as we have long said, we do want to reinvigorate commonhold and see it properly take root this time. We can’t fail again.

“[We will do this] through the introduction of a comprehensive new legal framework, and we’ve taken all but two of the Law Commission’s recommendations taking that framework forward and then through different policy changes, that the Law Commission didn’t advise on: banning new leasehold flats so commonhold becomes the default tenure.

“And I do think we need to take that step in banning leasehold flats, or the system will not change fundamentally.

“So, the White Paper is a key step forward in making that transition to a commonhold future. I am very much looking forward to the feedback we’ll get on it.

“And it’s designed to be as accessible as possible because I think there is, and everyone with this room, I’m sure, would accept, quite low levels of awareness about what commonhold entails; a degree of skepticism in the industry amongst lenders, Etc, and we want to bring everyone on board.

“The longer lead-in time we have as possible, the more that we can take people with us and build a case for commonhold the better.

“… We want to introduce it as a draft Bill, partly because of those flaws in the 2024 Act I’ve spoken about, we think this does warrant additional levels of parliamentary scrutiny.

“We want the select committee and others to be able to see it and to comment on that draft Bill and we will try and do as much of the reform that we need to do in this Parliament through that Bill.

“But there is a possibility that that becomes more than one piece of legislation.

“We’ll see what the feedback is to the draft legislation, including from the select committee as to the best way forward on all of these fronts, whether it’s forfeiture, ground rents or, indeed, the injustice of fleecehold private estates and how we can give not only residential freeholders on those estates the consumer protections through the LAFRA Act.

“… So, there is a trade-off, and I’m afraid it is a necessary, a trade-off between speed and care, as I’ve said, but that’s how we intend to proceed.”

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QUESTIONS

Judicial review

Lord Truscott asked the minister about the online calculator for lease extension and whether the judicial review over the abolition of marriage value, and the 0.1% cap on ground rent will cause delays to this reform.

Mr Pennycook replied: “I am going to be very careful about what I say here and I am not going to comment on ongoing litigation. I think people will understand why.

“It allows me to make a wider point. The vested interests that want to see no reform in this area are incredibly powerful. And we have to proceed with caution and that when it comes to legislating and introducing policy things are as watertight as possible. I will say no more on the live cases.

“What I can confirm, and this is all in the public domain, there are six claims – some of you have been following the actions – they relate to the enfranchisement measures in the [2024 LAFRA] Act restricting the payment of marriage value, the cap on ground rent and the calculation at 0.1% of the freehold value, enfranchisment process costs and intermediate leases.

“You can draw your own inferences for what that means for the implementation of the 2024 Act, but I won’t say anything more than that for understandable reasons.”

Fleecehold

Mike Reeder, Labour MP for Northampton South, asked about exploitative practices on fleecehold housing estates (ironically, NLC activist Joy Dickinson, who is credited with coining the term in 2017, was in the audience].

Mr Pennycook declined to go into precise provisions to curb fleecehold but “my intention is for that Bill to be as ambitious as we can possibly make it.

“There is a scenario where we … seek views on the emerging legislation and receive feedback that there is a sensible way to do it that doesn’t involve one very large Bill. It might be two Bills, but we do want to address some of these issues. And when it comes to fleecehold in particular, the manifesto commitment is very clear to provide protections to residential freeholders on existing estates and to end the prevalence of these arrangements going forward.

“There’s a sort of gap in that which is addressed in leasehold terms through those measures that allow you control through right to manage.

“The issue of control is something that we’ve given a lot of thought to. What does control mean on one of these private estates? In the sense that the consumer protections in the 2024 Act will provide a measure of redress, but in some ways they have the benefits and the flaws of the existing provisions that apply on service charges to leaseholders that provide a measure of protection. But there is a sort of gap in the sense of control.

“And then on the prevalence of new arrangements – and I think this is a really, really tricky policy area, and it does cross into local government, finance, and all manner of arrangements Ian Lavery [Labour MP for Blyth and Ashington] asked me about it yesterday. The Competition and Markets Authority did a very useful report, which I sort of encouraged Mike and others to look at.

“There are essentially two problems here. One is that the amenities being built on many of these estates simply aren’t up to a high enough standard.

“And I do absolutely sympathize with local authorities who say: why on earth should I pay and should ratepayers in my area pay to bring substandard amenities up to scratch and maintain them?

“So, we can’t take the approach – this was the Conservative approach actually on the Levelling Up Bill from a couple on the backbenches – just to force councils to adopt estates whatever condition they’re in.

“So, … part of the answer has to be a sort of common set of standards. So that we can then say to local authorities: well, there’s really no reason that you shouldn’t be adopting as quickly as possible.

“You can be guaranteed of the standards of maintenance cost and therefore overcome the problems of double-charging via council tax and management fees etc.

“There’s a sort of thorny problem there, but it is quite complex. So, we have got to go out to consult on that particular issue to see what is the best way to reduce the prevalence of those arrangements. And how can we ensure that we don’t have a number of knock-on and unintended consequences in doing so.”

Gove’s ground rent consultation, with option of zero

Katie Kendrick, of the National Leasehold Campaign, said its members were waiting for the response to the ground round consultation in January last year. But was the freeholders’ judicial review holding it up?

Mr Pennycook replied: “The commitment on ground rents is really clear. We are going to deal with unregulated and unaffordable ground rents.

“In a very practical terms, being entirely candid, there isn’t a huge amount of point in us publishing a separate response to what we’re essentially going to do.

“Really the response will be when we outlined the policy way forward in terms of how we intend to tackle that problem. But we have been very clear that we intend to do so in legislation. There’s obviously internal discussions in government taking place to see what that looks like.

Capitalisation and deferment rates

James Wyatt, a chartered surveyor and founder of Parthenia, which created an alternative mathematical model to working out lease enfranchisement costs said the market in flats was paralysed.

Court of Appeal turns down Mundy case – unanimously

Leaseholders with short leases know that there are reforms but they are also aware of the freeholders’ judicial review to be heard in July. There will be consultation on capitalisation and deferment rates in the summer, but how long will it take? Mr Wyatt reminded the APPG that these extensions “life altering decisions” given the costs.

Mr Pennycook replied:

“What is the alternative because I have had this put to me? Do you credibly think I can pluck a capitalization and deferment rate out of the air and just implement it? No, I would assume you don’t.

“At no point when the legislation was going through did anyone pretend that there wouldn’t need to be consultation of secondary legislation. So we have to go out and consult on that.

“I’m not going to give a firm timetable on what that implementation looks like. And is bound up with the ongoing litigation. … We are in a very difficult position … That’s why it grates a little to hear the carping from people that don’t have to make these decisions, giving people the impression out there that it’s incredibly easy just to switch all these things on. It’s not.

“I think the fact that there is ongoing litigation and that we do have to fix flaws in that 2024 Act through primary legislation should serve as a warning to anyone who says just rush ahead and Implement this without doing it properly.

“If I pass legislation that needs to be fixed by a future government in primary legislation, I will have failed in my task. And we’re not going to make those same mistakes.”

Failure if commonhold is not the preferred alternative to leasehold

Sebastian O’Kelly, director of LKP, told the minister that not all leasehold groups were expressing frustation at the consultation process and timescale of the secondary legislation, which was foreseen and inevitable. The minister had outlined his schedule of reforms last November and kept to it, and was even slightly ahead of it with the right to manage reform.

Mr Pennycook replied that his department would not blindly stick to a schedule if it can advance the reforms by a month or so, as it had done with right to manage.

“We are straining every sinew to accelerate this programme. There are capacity issues: the programme of secondary legislation is more than 20 Statutory Instruments, and some are incredibly complex to implement.”

Mr Pennycook referenced an “expectations management failure of the past government”, adding “I think it did convey the idea that this [2024 LAFRA] Act can all be switched on overnight within the first month or two.

“On commonhold I think it’s worth saying, if commonhold is just seen as an alternative to leasehold and not the preferred alternative, not a radical improvement on leasehold, then I think we will have failed.

“Given that we’re banning leasehold flats there won’t be a question of that for new commonhold developments. It’s going to be the default tenure. But I think when it comes to existing leasehold, there’s a lot in the commentary yesterday: Are we creating a two-tier market. Are we leave existing leaseholders behind?

“I don’t think so for two reasons.

“You will have – and I’m absolutely determined to get it right – a fundamental choice in a few years time, which is: do I want to convert to commonhold in a block of flats?

“The process should be as simple as we can make it, but if I want to do that, great. I get all the benefits that come with that: no ground rent, greater control over the management and costs in my building.

“If I really don’t want to, and I want to remain under the existing arrangements, that will absolutely be fine. But you will do so with us having introduced far greater powers, rights and protections for you, and the ability to more cheaply and simply enfranchise or extend your lease.

“So there will be a better leasehold system in place.

“We’re not going to force everyone to convert, but we want to make it attractive to convert and as simple as possible to do so.

” … The Law Commission put forward two options on conversion to commonhold. And we’re giving very, very careful consideration to whether either of those options is absolutely the right one, or whether there is a variant on either of those options that will be more successful in terms of allowing more people to convert to commonhold if they want to.

Are housebuilders really on side with commonhold?

Sebastian O’Kelly told the minister that the audience included a director of the 1,100-flat Chelsea Bridge Wharf RTM company, which had secured self-management last month when developer the Berkeley Group acquiesced to it.

Mr Pennycook was aware of the RTM case, and Mr O’Kelly asked whether it was his perception that housebuilders were now open-minded to flat owners controlling their sites.

Mr Pennycook replied: “We’ve not extensive engagement with housebuilders on the issue of RTM.

“But I think it’s fair to say that they are very much aware that we are deadly serious about doing everything that we say.

“We’re not going to kick the can down the road on this.

“We are going to bring the system to an end effectively by the end of the Parliament and I think the housebuilders know we’re going to do it. They’re coming to an accommodation with the fact that’s going to mean more buildings enfranchising.

“When it comes to commonhold, I think it’s fair to say the housebuilders are essentially agnostic on whether they build new leasehold or commonhold.

“They want some assurances. Part of what we’re trying to do in the White Paper is to give assurances to lenders, to housebuilders as well as consumers that the change does not come with concerns. But most of them are essentially agnostic as to what they build.

“If we hadn’t made the policy choice that we have, beyond the Law Commissions recommendations, to ban new leasehold flats, I don’t think commonhold would take root.

“Just setting commonhold up as an alternative without any active policy support and just leaving it there would I think broadly have the same outcome as after 2002.

“So we’re not giving them a choice on new developments, but we want to take them with us. I’ll be really honest about that.

“The housebuilders in this scenario are not our enemies. We want the housebuilders and the lenders and everyone on side. We need people out there saying that this is not just an alternative, but a real improvement.”