Unpacking the Government’s Commonhold Revolution

25 March, 2025 3 minutes reading time

What the White Paper Means for You

The Government’s recently released white paper outlining significant reforms to commonhold ownership signalled its intention to move forward with legislation as quickly as possible. The reforms aim to empower leaseholders and provide a viable alternative to the often-problematic leasehold system. This move sparked considerable discussion within the property sector. Since there are few commonhold developments, the structure generally confuses many purchasers and lenders. Here, we outline the key proposals, explain potential pros and cons and what the proposals are likely to mean in practice.

What is Commonhold?

For those unfamiliar with the term, commonhold is a form of freehold ownership in which individuals own their flats and share ownership of the building’s communal areas. This differs from the more common leasehold structure, where a leaseholder effectively rents the property for a fixed term. This structure eliminates the concept of a landlord and lease, instead transferring control to the residents through a Commonhold Association.

Key Proposals of the Government’s White Paper

The white paper will form the basis of a draft leasehold reform bill expected later this year. The proposed changes are designed to make commonhold a more attractive and accessible option. They include:

1. Revitalising Commonhold: The reforms aim to make it easier for developers to create commonhold properties and for existing leaseholders to convert to commonhold.

2. Improving the Existing Commonhold Model: Proposals include simplifying the current legal framework and addressing issues that have hindered its uptake in the past.

3. Empowering Commonhold Associations: The proposals seek to strengthen the role of Commonhold Associations and ensure they are well-equipped to manage their buildings effectively.

4. Addressing Existing Leasehold Issues: While the focus is on promoting commonhold, the white paper also discusses leasehold reforms, such as capping ground rents and simplifying lease extensions.

Advantages of Commonhold

The Government believes the new proposals will make commonhold the default tenure for new flats, providing homeowners with greater control and autonomy over their properties. While also ensuring robust property maintenance plans and mandatory reserve funds. With Commonhold Associations operating openly, it’s believed that the new structure will promote transparency and fairness, allowing all owners to participate in decision-making. Furthermore, commonhold properties will likely increase in value due to rising desirability. Finally, a commonhold structure eliminates the burden of ground rent payments, resulting in significant financial savings.

Disadvantages and Potential Challenges

The white paper highlights the complexity of the current commonhold model. It also notes the need for unanimous consent, often leading to lengthy and costly processes. As a result, unless the process is modified, developers may hesitate to adopt commonhold, citing perceived complexities and financial risks. Furthermore, the potential for owner disputes necessitates robust dispute resolution mechanisms, the details of which are currently unclear. Finally, lenders will need to adapt their lending policies to accommodate the expansion of the commonhold market.

Our Advice

The white paper marks a significant step toward reforming the UK’s property ownership landscape. However, the successful implementation of these reforms relies on the Government’s ability to address the significant potential challenges effectively.

The first draft of The Leasehold and Commonhold Reform Bill is due towards the end of 2025. Based on what has appeared in this month’s white paper, it remains to be seen whether developers, lenders and consumers will be firmly convinced commonhold is the way forward. Please contact us if you need further information or advice about any property-related matter. We’re here to help.

Please note that all views, comments or opinions expressed are for information only and do not constitute and should not be interpreted as being comprehensive or as giving legal advice. No one should seek to rely or act upon, or refrain from acting upon, the views, comments or opinions expressed herein without first obtaining specialist, professional or independent advice. While every effort has been made to ensure accuracy, Curtis Parkinson cannot be held liable for any errors, omissions or inaccuracies.

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