The £250 ground rent cap, enfranchisement, right to manage and re-energised commonhold mean it will ‘wither on the vine’
Inflation means that in 20 years 60% of ground rent value will have gone
Berkeley Homes boss backs commonhold moves to restore confidence in London flats
Fleecehold estates now make up 60% of new housing
In an emphatic speech – with command of the detail – housing minister Matthew Pennycook told MPs of the All-Party Parliamentary Group on Tuesday of his determination to end the leasehold system for good in this Parliament.
“I promise you that we are going to get the job done,” he said.
“We are going to bring the leasehold system to an end by ensuring that commonhold is the default form of tenure going forward.”
Part of the job will involve switching on secondary legislation in the 2024 Leasehold and Freehold Reform Act; the rest as primary legislation under the new draft Commonhold and Leasehold Reform Bill.
Earlier Mr Pennycook had spoken in very similar terms to the Housing Select Committee whose evidence sessions on the Bill have now concluded.
That session can be read in full here: https://committees.parliament.uk/oralevidence/17340/pdf/
“We are going to ensure that existing leaseholders have a range of choices: whether to enfranchise, once we have switched on the 2024 Act, making it cheaper and easier to do so.
“They may wish to look to commonhold conversion. I hope that we can make commonhold sufficiently attractive that they do consider converting in very large numbers.
“But the [leasehold] system will have ended. It will wither on the vine in what I hope will be in a short period of time.
“I was reading early this morning a historical article on how they put the 1925 Law of Property Act into place. It took 30 years to put it into place. We are going to end the leasehold system in five and I promise you that we are going to get the job done.”
The hour-long APPG session, chaired by Justin Madders and attended by former MP chair and veteran leasehold campaigner Sir Peter Bottomley, was an opportunity for interested MPs and peers of all parties to question Mr Pennycook, who also answered questions from stakeholders in the sector.
Michael Gove said ground rents should be ended in 20 years not 40
The first question asked came from Mr Madders, APPG chair and Labour MP for Ellesmere Port and Neston:
“We have got 40 years to get to a peppercorn rent. We have obviously heard from Michael Gove [at the Housing Select Committee, March 3 2026 here that he could do better than that. Could you explain how we have got a claim that this could basically be done in half the time than the government is planning to do it?”
Mr Pennycook replied: “I can assure you that the freehold lobby does not want this provision that is in the draft Bill.
“In terms of the benefit to leaseholders, the majority of the work is being done by the cash cap [of £250]. For leaseholders that is the big win. Inflation will erode the cash cap so that in time it will be significantly reduced.
“In 20 years it will have seen a 60% reduction in its value. So the cash cap is doing the work.
“When it comes to a peppercorn there will be only small and nominal ground rent terms remaining.
“As I acknowledged at the [Housing] Select Committee, the more value we transfer from freeholders to leaseholders the more the legal risk increases. The more the risk of disruption to the housing market that there might be if you get things wrong which will be very detrimental to leaseholders, if we see mass freeholder insolvencies and the consequences that will entail from that. It would not be a benefit to leaseholders.
“We took a decision looking at all the options on what is the just and proportionate intervention that is deliverable and defensible – let’s just get it into place in an orderly manner for the benefit of leaseholders. I think we have ended up in the right space, but we will see what the select committee says and what advice comes through in the pre-legislative process.
“In my view the transition to peppercorn is secondary to the big win which is the cash cap.
“It is a huge win. The impact assessment on that has a value transfer from freeholders to leaseholders is substantial: £10-£12 billion.”
Delays over introducing enfranchisement reforms
Lord Truscott, Independent and co-chair of the APPG, and Joseph Powell, Labour MP for Kensington and Bayswater and former co-chair of the APPG, raised issues concerning the enfranchisement reforms.
Lord Truscott was concerned about the “unfinished business with LFRA” particularly the abolition of marriage value. “Was the government still committed to this and what sort of timeline?”
Mr Powell asked whether there was any way that the freeholders’ efforts to appeal the judicial review decision against enfranchisement measures including marriage value in the 2024 Act could be “curtailed”? “Or is there a point when we just say we need to go ahead and call time on these delays?
Mr Pennycook replied: “I take your question to be: are we going to wait for every legal challenge across the country before we switch certain provisions on? And “no”, is the very clear answer.
“We did want to see the result of the [freeholders’ judicial review] high court challenge which we robustly defended and it was comprehensively dismissed. That allows us to progress. But this is a very litigious area. We expect challenges to the draft [Bill] and we will robustly defend all the challenges that come in.
“The parliamentary consensus, the fact that it was in everyone’s manifesto and has been in manifestos for years mean that the will of Parliament is clear.”
Mr Pennycook then addressed criticisms of the delays over enfranchisement reform.
“Let me deal with another myth: if only we had consulted on the valuation rates sooner we could have switched all this on. That is absolutely not the case. We will consult on valuation rates. We will do that in fairly short order in the coming months.
“The result of that consultation and our policy decisions on the capitalisation and deferment rates are made in good time.
“But we cannot turn on the 2024 Act enfranchisement provisions until we have fixed the small number of specific flaws that are in that 2024 Act.
“I want to bring this home to people here because I did not know this when I was a shadow minister. I only found out about this when I got into the department on, I think, it was day two.
“The previous government had allowed, in the wash-up allowing that Bill to go through, that it had these flaws. It intended to rectify them through amendment, but it did not do so. It let the Bill go through knowing we would have to fix them through primary legislation.
“It is my firm intention to fix them in the final substantive Bill when we bring it forward. The sooner that Bill gets royal assent the better. But we can’t switch on those enfranchisement provisions until we have done that.
“We could have done the consultation on valuation rates in 2024, but it would not have made a difference. We need those fixes in primary legislation.”
Later Mr Pennycook added: “I don’t want to disparage him because he has made a huge contribution in this area, but it was Michael’s [Gove, when housing secretary] decision to cherry pick enfranchisement provisions from the Law Commission report that made switching on the rest of it very difficult. Some of it is obsolete, some needs to be changed.
“They did not do what the Law Commission advised, which was to repeal the whole of the 1967 and 1993 Acts and replace them. They toyed with it – in a way that I can understand to try to get a Bill through towards the end of a Parliament.
Berkeley welcomes ‘direction of travel’ with commonhold to restore confidence in London flats
With leave from the chair, Sebastian O’Kelly, of LKP, asked Berkeley Homes CEO Rob Perrins for his reaction to the commonhold proposals, mindful that Berkeley had not opposed right to manage by leaseholders of the 1,100-flat Chelsea Bridge Wharf – which includes Berkeley’s corporate HQ.
Mr Perrins said: “The ultimate thing that we are trying to achieve is a restoration of confidence in flats. Our business is dependent on this: 95% of our business is flats.
“Having a lack of confidence in flats, which this room has highlighted, owning flats is very important to us. I am completely on board with what we are trying to achieve. The debate is really the best way to achieve it, and the quickest way.
A lot of the issues I think are about poor behaviour and how you resolve poor behaviour is very important.
“The quicker we can get to a commonhold system that people have confidence in – where residents feel that they have the control … there are issues in how to manage a very complex building: fire safety issues, affordable housing, shared ownership etc.
“The minister mentioned Royal Arsenal [a complex mixed use site in Woolwich, south east London, built by Berkeley]. How does anyone know on day one what an estate is going to end up looking like: the Royal Arsenal will be worked on for 30 years. Commonhold has to have the ability for us to build a Crossrail station. That was not envisaged at the point when we started the scheme. As a privately funded station it came through after the event.
“I think we can achieve it. I think we can restore the confidence and we have got to get behind this, as an industry, and make it happen.
“I think we need to work in a collaborative approach. We will have issues like how you manage an affordable block: 35% of what we build is affordable; social rent has issues and shared ownership goes along a different route. All these are issues that are fanning concerns how we have to operate a site.
“So long as we can bring in effective legislation that makes it easier for us to do this … What I don’t want is that we end up in a situation that we had with the last government with a Building Safety Act that was not fit for purpose.
“I am supportive of the direction of travel we are in. If you get this across the line then fantastic.”
Matthew Pennycook replied:
“Rob has made some really good points. London’s housing delivery is absolutely flat-lining. There are a number of reasons for that, but one of those reasons is 96% of new homes in London is flats and there is a real crisis of confidence in flatted development for various reasons: very high service charges, ground rent charges, heat network charges are part of the reason people do not want to buy a flat.”
Right of first refusal to buy freehold of leasehold houses
Phil Brickell, the Labour MP for Bolton West, asked the minister why leasehold houses did not have the right of first refusal to buy their freeholds like owners of flats.
Mr Brickell said: “Predatory individuals are buying freeholds to homes at auction for very small sums of money, perhaps a couple of hundred quid at a time but en masse, and on that issuing vexatious correspondence to leaseholders claiming that they are in breach of their agreement with that individual and then threaten to take them to court.
“They do not have any right of first refusal to buy the freehold of a house.”
Mr Pennycook replied: “I am going to have to be really really careful here with what I say, not leaset because there are a number of live investigations taking place.
“Those enfranchisement provisions in the 2024 Act when we turn them on will make it cheaper and easier obviously for leaseholders to enfranchise.
“It deals with some problems.
“I had to deal with Sheffield MPs and council discussing a particular case up there that you may all be aware of [rogue solicitor landlord Andrew MIlne].
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“They made a very clear case for right of first refusal on houses. But I don’t know why the last government did not introduce right of first refusal for houses as well as flats.”
Fleecehold estates now 60% of new housing
Nia Griffith, Labour MP for Llanelli, raised issues about fleecehold management and “how we can ensure that there is much more transparency and protection so that there are not hikes for this and hikes for that”.
Mr Pennycook replied: “I am absolutely determined to address the injustice of what we termed in our manifesto as ‘fleecehold estates’. Freehold home owners are in some cases having an absolutely torrid time as a result of charges. There is a real element on the conveyancing side and sales side not making people aware of what’s going on here.
“I remember when drafting the manifesto saying “I want fleecehold in here” and the party official questioned whether people would know what fleecehold is. I assured him that across the country people knew exactly what fleecehold meant.
“We have got to work out how to reduce the prevalence of these estates. These private estate management arrangements are a huge amount of supply: I think 60% of new housing supply now.
“I have broadly been attracted to the CMA (Competition and Markets Authority) proposal which is that we get common adoptable standards in place for the infrastructure and we enforce that.
“At the moment there is infrastructure that has been poorly delivered and you are asking local authorities to bring them up to standard and maintain it.
“There is a real injustice here, including the double charge of council tax and management estate service charges [for homeowners].
“We have got to reduce the prevalence [of fleecehold] and we have a consultation out on that. There are trade-offs there, and serious issues that cut across various government departments.
We can also give residents and freeholders on these estates more control. Control is the missing element on the residential freehold side: you have got right to manage for leasehold side and nothing comparable exists for freehold estates.
“We have asked the Law Commission to look at that problem and come back to us with recommendations. But we have not had the report yet.
“We can switch on the 2024 Act regulatory framework for consumer protection of residential freeholders. It is a regulatory framework broadly akin to service charge framework for leaseholders, with some additional provisions. “Residential freeholders will be able to go to the tribunal and challenge unreasonable charges.”
Regulation of managing agents
In answer to Jim Dickson, Labour MP for Dartford, who spoke in favour of regulating managing agents, Mr Pennycook replied:
“The previous government asked Lord Best to make a review of regulating managing agents and he produced a very well written blueprint for the regulation of all property agents, not just managing agents.
“He has a very clear wish to see an independent single regulator. That comes into the context of a government seeking to rationalise ARBs [Arms Length Bodies] more generally.
“What we have done is to go out and consult last year on the strengthening of leaseholder protections: professional, mandatory qualifications for example.”
“It is something that the government will have to decide.”
Alan Draper, a managing agent asked whether involving existing professional bodies would just mean marking their own homework.
Mr Pennycook replied: “That is the charge that is made, and the professional bodies have a response to it.”
Jeff Smith, Labour MP for Manchester Withington, raised the issue that there may only be two sessions left in this Parliament: “We may only get one Bill in this session, and one Bill in the next. Are you confident that we can get this through?”
Mr Pennycook replied: “Jeff, I am confident that we can get it done.”
Right to manage
Mr Pennycook said: “The government took a very small number of the Law Commission recommendations forward on RTM in the 2024 Act. They expanded the number of leaseholders who are eligible for RTM.
“The rest of the RTM recommendations can be taken forward and are broadly coherent.
“But we will deal with it and the Law Commission’s recommendations within this Parliament. And you have my word on it.”
Related posts:
Lee Rowley and Matthew Pennycook duel political points over leasehold reform Bill
Pennycook, give us equal arms to fight freeholder bullying in the courts
In Pennycook government has a good housing minister: let him finish the job by finishing off leasehold
Path is set to kill off leasehold and replace it with commonhold
Shadow housing brief passes from Mike Amesbury to Matthew Pennycook
Freeholders try to woo MPs with a Charmaine offensive, but they are not having it
What a mess of potage. He is worried about Freeholders going bankrupt. What next : Save the Freeholder! Tough.
He’s worried about legal challenges despite the green light from the judges
Then there are the famous “flaws” which he never outlines and seems nobody asks what they are which is bizarre!
And we are all tired of hearing about this massive transfer of wealth. All that means is the projected income from us! For doing precisely nothing. It’s not a real capital loss at all.
No timetable as usual. Whenever. The reasons for not getting valuation done are totally unconvincing.
I wonder why LKP are once again repeating the untruth that Berkeley Homes did not oppose right to manage at Chelsea Bridge Wharf..it is a matter of record that they did oppose it.
Chelsea Bridge Wharf, Queenstown Road, London, SW11: LON/00BJ/LRM/2024/0018 & LON/00BJ/LRM/2024/0020 – GOV.UK https://share.google/DwO0fczgnwMBWviqL
Leaseholders at Chelsea Bridge Wharf have also pointed out nu.merous misrepresentations of how RTM was acquired at Chelsea Bridge Wharf, in LKP’s previous blog piece about Chelsea Bridge Wharf.
The fact that LKP stated in parliamentary evidence that BH did not oppose RTM at Chelsea Bridge Wharf is worrying since they know this to be untrue.
Mike,
Anyone reading the ruling that you give can see that Berkeley insisted that the RTM company take the issue to the FTT to establish that Chelsea Bridge Wharf is one building (not several as, frankly, any visitor might assume) and therefore that it lawfully qualified for RTM.
para 10 states: “The First Respondent (Berkeley) was represented by Mr Lorenzo Leoni (Counsel) instructed by Forsters LLP Solicitors. He took a passive role in the proceedings and put the Applicant to proof that the Premises consisted of a single building.”
That was the limit of Berkeley’s views on the RTM.
Berkeley, with its huge resources, could have opposed the RTM’s professional evidence with evidence of its own, or appealled to a superior court. It did neither.
In short, it allowed this RTM to take place.
(The head lease investors, Fairhold Artemis, were very much minded to keep management in their hands, but could do nothing given the passive stance of Berkeley over RTM.)
Regards, S
This is a really interesting update, and it’s encouraging to finally hear such a firm commitment from Matthew Pennycook to end the leasehold system within this Parliament. If delivered, it could mark one of the biggest structural changes in the UK housing market in decades.
That said, many leaseholders will probably remain cautiously optimistic. We’ve already seen how complex reform can be, especially with parts of recent legislation still needing full implementation and clarity.
The shift toward commonhold as the default tenure does sound like the right long-term direction, particularly if it gives homeowners more control and transparency. But converting existing leasehold properties at scale will be a major challenge.
I’ve been following these kinds of housing policy changes closely while working on content around schemes like the First Homes Scheme, and it’s clear that affordability and ownership structures are becoming more central to the conversation.
Overall, the direction is positive — but as always, the real test will be in execution and timelines.
Important also to prevent the so called Integrated Retirement settlement developers and operators from getting around the move to Commonhold by introducing some equally dreadful work around to their current unregulated existence, selling long leaseholds at a premium and allowing lessees eff3ctively no say in managing the settlements.
We already see suggestions of a move to “right to live”, effectively the same as their current model but with a vocabulary change
There must be only 2 models, rental for a well defined level of accommodation and included services suitable for ordinary or Care/Nursing Home accommodation and purchase/commonhold.. in the former case the services are provided under control of owner but subject to appropriate regulation otherwise the common holder purchaser acquires a right both to live and determine services and services providers SUBJECT TO MINIMUM STANDARDS VARIABLE ONLY BY A. VERY LARGE MAJORITY OF COMMON HOLDERS but still subject to regulated standards of compliances as to personal obligations, statutory standardsetc
Although the leasehold reforms are welcome, after decades of working in the property sector I have come to the conclusion that people should live in houses not flats.
The only exception would be for flats in large city centres, and even there i would keep them to the height of Victorian tenements so a lift to the higher floors would not be essential.
Service charges in high rise flats will continue to remain high whether you have commonhold or leasehold. Anti-social behaviour seems to be increasing over noise, leaving rubbish about , and acting aggressively so sharing space with strangers is becoming a worse experience. Flats are not a good place to bring up children.
Given the fall in the birth rate, if inward migration was limited there would be a much reduced demand for new flats.
In my opinion, it is in the Fleeceholders best interests to delay the transition to Commonhold for as long as humanly possible.
They will continue to use all all means at their disposale. This may include legal or the threat of legal action in a effort to intimidate or bully the Government, and encourage the watering down of legislation or compromise in favour of the Fleeceholders primary objective.
The “Unintended Consequences” arguement recently put forward is without merit in my opinion. From memory, Lord Justice Peter Holgate KC, asked, in words to the effect “how much institutional investor money is in freehold “The reply was we do not have that information to hand or words to that effect.
I agree with Lord Gove when he was quoted as saying “Ground rents should be ended in 20 years not 40”
A Freehold is only worth what the buyer offers and the seller accepts. And it really is as simple as that.
It is not just managing agents who need regulation, but also Right to Manage (RTM) companies. I live in a building where this is a reality, and I am tired of going in circles. I have repeatedly asked for transparency and accountability regarding charges, only to be met with incomplete or ignored information requests. Specifically, statutory Section 22 requests are being ignored or only partially fulfilled. It is deeply frustrating that while my legal requests for information are dismissed, the Demands for Service Charges are the only things that arrive on time and without fail.
When rogue agents mislead inexperienced leasehold directors, it creates a dangerous combination. By the time these directors realise they’ve been ‘used’ and recognise the damage done to other leaseholders and themselves, the situation is often beyond repair.
Mr Raja,
I whole heartedly agree
“Leaseholder fustration means that in 3 years 100% of Mathew Pennycock will have gone.”
The choice is simple Labour, peppercorn GR or you are out. What Freeholdes are losing is potential income only. They still have their initial capital investment plus profit to date.