Commonhold reform: what does the government’s white paper say?

Posted: 06/03/2025

The Labour Party made abolishing the leasehold system a key manifesto pledge; now, in its newly published white paper on commonhold, The proposed new commonhold model for homeownership in England and Wales, the government has revealed its intention to ensure that commonhold becomes the default tenure, starting with new build flats.

How will the government achieve the transition to commonhold?

In short, by reform of the existing legal framework for commonhold (established under the Commonhold and Leasehold Reform Act 2002), based in a large part on the recommendations made by the Law Commission in its 2020 report.

The government will supplement the reformed legal framework with a ban on the sale of new leasehold flats to ensure that commonhold becomes the default tenure for new flats.

The intention is for these changes to apply across England and Wales.

What is the timetable for reform?

The government wants commonhold to become the standard tenure by the end of this parliament (ie likely 2029). It will not ban the sale of leasehold flats until it is confident that reformed commonhold is viable.

It will publish a draft bill – the Leasehold and Commonhold Reform Bill – in the second half of 2025 for pre-legislative scrutiny. Alongside the reforms for commonhold and new supply, the bill will contain detail on the government’s proposals for conversions of existing leaseholds to commonhold.

It will consult later in 2025 on the outright ban of new leasehold flats, and will seek input from industry and consumers on fundamental points such as potential exemptions for legitimate use and how to minimise disruption to housing supply.

What does the white paper say?

The paper describes the headline reforms that the government intends to make. The reforms focus on three aspects:

• how to make commonhold work for all types of developments;
• how to increase flexibilities and safeguards for owners; and
• the introduction of new tools to enable commonhold associations to overcome challenges. 

For example, the paper proposes:

How to make commonhold work for all types of developments

• Introducing ‘sections’ to support mixed use development (this would enable a building or estate to be divided into different sections to separate out the management of different areas or groups of units within a commonhold).
• Providing for separate heads of costs (to enable developers and commonhold associations to allocate certain costs, and decision-making over those costs, according to who has use of certain services).
• Allowing certain permitted leases including shared ownership (to expand the appeal of commonhold to a more diverse pool of buyers and make commonhold more attractive to developers).
• Introducing greater flexibility around development rights where developments are completed in phases (to enable developers to reserve any rights they deem necessary for the completion and sale of units on the site).

How to increase flexibilities and safeguards for property owners

• Setting a higher threshold (of 75% not 50% of property owners) for changes to the local rules that form part of the commonhold community statement.
• Prohibiting event fees (for example on resale) except where the commonhold is a dedicated retirement development.
• Enabling commonhold associations to use local rules to restrict certain short term uses, such as holiday lets and other short-term letting arrangements.
• Introducing changes to how the commonhold budget is agreed (this includes a requirement that the commonhold’s budget is subject to a yearly vote, requiring a majority of commonhold owners to support a proposed budget before it can be passed).
• Mandating reserve funds to mitigate large or surprise costs.

Introducing new tools to enable commonhold associations to overcome challenges

• Allowing commonhold associations to take out a loan, in the form of a fixed or floating charge.
• Introducing a more effective dispute resolution procedure, with ultimate recourse to the courts.
• A right for commonhold associations to apply to the court for an expedited order to sell a unit if its owner fails to pay their bill to the commonhold association and associated rights for lenders (designed to protect their security).

Key aspects that remain unresolved

The government says it is still working to resolve three areas (which will be fundamental to the success of the reform). These are:

• the proposed ban on the sale of leasehold flats;
• how to convert existing leasehold to commonhold; and
• how to make commonhold work for all block sizes.

Banning the sale of new leasehold flats

The government sees having a viable commonhold model as the essential first step towards the development of a ban, so it will not ban the use of leasehold until it is confident that a viable alternative, through reformed commonhold, is in place.

How to convert existing leasehold to commonhold more easily

The current model requires full consent from every party involved – freeholder, leaseholder and every lender. The government wants to get to a position where the consent threshold for conversion to commonhold mirrors that for enfranchisement, which is 50%. However, this has implications for those leaseholders within a block who do not wish to or cannot afford to take part in the conversion (known as non-consenting leaseholders) and raises issues around how a block comprised of unit owners, and non-consenting leaseholders can operate effectively.

The government proposes to adopt what is called the ‘mandatory leaseback’ approach, as suggested by the Law Commission. Under this approach, those leaseholders who choose not to participate in conversion are allowed to continue living as leaseholders. The commonhold association would own the freehold of the building. The previous freeholder would be required to take a leaseback and become the head-lessee for these non-consenting properties. They would be granted a 999-year lease and no further lease extensions would be allowed for non-consenting leaseholders and any ground rent due would continue to be paid to the original freeholder (now an intermediate landlord sitting between the leaseholder and the commonhold association). The former freeholder would also receive an appropriate payment when the lease is purchased as part of the conversion of that flat to commonhold.

How to make commonhold work for all block sizes, in particular blocks of two to three units and large buildings, especially those over 11 metres tall

The government suggests that for micro-commonholds, some of the requirements could be disapplied or made voluntary. Tall buildings may need to be subject to extra rules.

Comment

The government intends to follow up on its manifesto commitment to make commonhold the default tenure, but does not expect this to happen anytime soon. When it does happen, the first target will be new build blocks of flats, but the government says it will only mandate commonhold for new build flats once it is satisfied that the reformed commonhold system is viable.

The limitations and flaws in the existing system make this a massive project. There is a reason why there are fewer than 20 developments in the country that are currently run as commonholds. The question remains whether the government can reform the system to the satisfaction of occupiers, lenders and developers. The system will only be viable if it can resolve all these conflicting interests.

What does this mean in terms of a timetable? Could we see new commonhold blocks of flat by 2029? The government would like to think so, but there is a fundamental lack of clarity around the timetable because of the scale and the challenges of the project. For developers of new build flats, this means more uncertainty. At what point will they have to move to a commonhold model? The government does recognise the scale of the change, so it is reasonable to assume that it would allow for a lengthy transition period.

For developers of commercial blocks, retail, industrial parks and shopping centres, it seems likely that the timetable for change will be longer still. The paper simply says that the reformed commonhold model may also be suitable for wider settings such as commercial blocks, or retail and industrial parks and shopping centres. In other words, it seems likely that reforms in the commercial sector would follow another white paper at some time in the future.

For owners of existing blocks, whilst the government is keen on the idea of conversion to commonhold, it seems that it intends to retain the right to collective enfranchisement as an alternative to commonhold. Specifically, the paper says that ‘for existing leaseholders, the value of enfranchisement and a move to a share of freehold arrangement should not be underestimated. Many existing leaseholders may decide that this works for them…’  In addition, even within blocks that do make the decision to convert to commonhold, it could take a long time to phase out the leases of any non-consenting leaseholders and for the blocks to be completely owned as commonhold. 

Ultimately, this means we are likely to end up with a mixed system of commonhold and leasehold ownership for a good while to come.

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