Ministers outline plans to ban new leasehold flats

Government departments in England and Wales have recently unveiled plans to abolish the leasehold system. According to the proposed legal amendments, the sale of new leasehold apartments will be prohibited in the future. This move aims to transform the existing housing construction model, aligning it more closely with the rest of the world, fostering a fairer housing market.

Under the current leasehold system, a third-party landlord (i.e., the freeholder) owns the building, while the leaseholder purchases the right to reside in the apartment for a fixed term. The government hopes to implement a system called "commonhold," under which owners will possess partial ownership and control over the building they live in. This shift would empower residents and provide greater control over their living spaces.

However, freeholders argue that the leasehold system is "the most effective way to manage large and complex apartment buildings." A white paper released on Monday indicated that the sale of new leasehold apartments would be banned, and the commonhold system would be "revitalized" with a new legal framework. The government stated that a draft of the Leasehold and Commonhold Reform Bill, containing details on how the new system will operate, will be published later this year, providing clarity on the implementation process.

Housing Minister Matthew Pennycook stated that the reforms would end "unfair practices and unreasonable fees in the hands of landlords." Leaseholders often feel they have no control over the costs of repairs and maintenance to the exterior of the building. The new legislation will apply to England and Wales, where there are approximately five million leasehold homes, impacting a significant portion of the population.

Kezia Tucker purchased a one-bedroom apartment in Southall, West London, in 2022. Her service charge bills have increased from around £65 per month in 2022 to over £200 per month this year. She expressed feeling helpless and unable to afford these costs, highlighting the financial strain on leaseholders. "I'm going to have to try and sell the flat or become homeless, I don't know what to do," she lamented.

Another leaseholder, Jane Hopkin, contacted the BBC, stating that the service charge for her three-bedroom apartment in Sheffield had increased by 356% in four years—from £106 to £483 per month—and that she was unable to sell due to the high fees. Jenny Baker in Southampton also struggled to find a buyer due to "unreasonable" service charges, which had risen to £7,200 per year. "The block of flats is in a terrible state. The windows aren't clean, there's black mould on the outside of the building – what am I actually paying for?" she questioned, expressing frustration with the lack of value for money.

According to data from real estate firm Hamptons, the amount leaseholders paid for the communal upkeep and servicing of their buildings in England and Wales rose by 11% between 2023 and 2024, averaging £2,300. Companies responsible for managing the buildings claim that the cost increases are attributable to legitimate expenses, including energy prices and higher inflation rates, but many leaseholders believe the fees are unfair, fueling discontent and calls for reform.

Natalie Chambers, Director of the Residential Freehold Association (RFA), stated that these measures "should not be seen as a trade-off between leasehold and commonhold." She added that the commonhold system would mean "residents would face greater financial and legal responsibilities for the maintenance and management of the building." The National Leasehold Campaign (NLC) expressed "delight" at the announcement, calling today's white paper a significant step forward, indicating a positive outlook for leasehold reform.

Mr. Pennycook stated that the government will "continue to drive reforms to help the millions of leaseholders currently suffering." Katie Kendrick, founder of the NLC, said it was crucial not to forget the people currently living in leasehold buildings. "While focusing on preventing future leasehold abuses, it is equally important to address the plight of existing leaseholders currently trapped in an unfair leasehold system. A commonhold conversion mechanism is essential to provide an escape route for those who are struggling," emphasizing the need for immediate relief for affected individuals.