The Government has taken a significant step towards abolishing leasehold properties in England and Wales, introducing a white paper that proposes making commonhold the default tenure for flats and apartments. The reforms, which aim to phase out leasehold for the 4,006,038 English & Welsh leasehold homes, have been described as the “beginning of the end” for a system often criticised as outdated and unfair. But what does this mean for Erdington homeowners and buy-to-let landlords, particularly those looking to sell in the coming years?
In this article, we’ll explore the proposed changes, the benefits and drawbacks of commonhold, and what Erdington flat owners should consider as the transition unfolds.
What is Changing with Leasehold?
Under the current leasehold system, homeowners who buy a leasehold property, have the right to occupy a property for a fixed period (of say 99 or 125 years) but do not own the building. There is a separate freeholder, who retains ownership of the whole building, often charging service fees and ground rent and making key management decisions.
Leaseholders since 1977 have had the right to extend the term of their lease (using a technique called ‘enfranchisement’). However, that was always costly and very complicated and still meant as a leaseholder, certain aspects of your home were in the control of a 3rd party (the freeholder).
Since the start of the Millenium, things have started to change. The Government tried reinvigorating commonhold, a system where homeowners collectively own the building and control its management through the Commonhold and Leasehold Reform Act 2002, which came into effect in 2004. However, it failed to gain widespread adoption due to legal and financial complexities, lack of lender support, and resistance from developers. Hence, the current government reforms aim to address these barriers and make common the default system for flats.
In the summer of 2024, the Conservative Government passed leasehold reform legislation (Leasehold and Freehold Reform Act 2024), but it was widely criticised for being significantly watered down compared to earlier promises. The reforms aimed to make it easier and cheaper for leaseholders to extend their leases and buy the freehold of their homes. However, they stopped short of an outright ban on leaseholds for flats, which was a major disappointment to campaigners.
Key points of the Conservative 2024 legislation included:
- Abolition of leasehold for new houses (but not new flats).
- Cap on ground rents for existing leasehold properties.
- Easier process for leaseholders to buy their freehold (but with some restrictions).
- Streamlining commonhold as an alternative to leasehold for flats, though take up remained low.
Critics, including Labour and leasehold reform groups, argued that the legislation failed to tackle the core issues, particularly for leaseholders in flats, who remained tied to often exploitative freeholders and costly service charges. Labour at the time promised much more radical reforms if they came into power, including abolishing leasehold altogether and transitioning flats to commonhold.
The new Labour government are pushing ahead with a more ambitious plan to phase out leasehold entirely and move to commonhold. However, practical challenges remain, such as handling existing leaseholds, particularly for complex multi-owner buildings. The Government say these reforms will create a fairer system, similar to what is already in place in many other countries, including Australia and the United States.
The key elements of the proposal include:
- A streamlined process for existing leaseholders to convert to commonhold.
- New protections to ensure managing costs remain fair and transparent.
- Stronger rights for homeowners to make decisions about their buildings.
Before, I talk about commonhold, I must stress this does not affect short-term leasehold properties. If you are a tenant renting a property on a short-term Assured Shorthold Tenancy (e.g. 6 months/12 months etc)/a rolling monthly Periodic Tenancy or a Standard Occupation Contracts in Wales from a buy-to-let landlord, don’t worry—these changes won’t affect you. When we talk about leasehold reform, we’re referring to long-term property ownership leases, which typically last between 90 and 150 years (or even longer). If you’re a tenant, your rental agreement remains the same, and these reforms won’t impact your ability to rent or renew your tenancy, nor will it give you the right to buy the freehold.
The Pros of Commonhold
For many, commonhold presents an appealing alternative to leasehold. Here are some of the key benefits:
✅ True Ownership – Unlike leasehold, commonhold allows homeowners to own their property outright with no expiry date. There is no lease to extend, no risk of the lease running down, and no ground rent.
✅ More Control – Residents will be able to manage their own buildings, meaning they can decide how service charges are spent and who is responsible for maintenance.
✅ No Ground Rent – Leaseholders face costs that can escalate unpredictably, but commonhold removes ground rent.
✅ A Fairer System for Buyers and Sellers – Theoretically, this could remove some hurdles that make leasehold properties less attractive to buyers, potentially increasing demand.
The Challenges of Commonhold
While the Government’s plans sound promising, there are challenges to consider:
⚠️ Management Responsibility – Homeowners in a commonhold will collectively manage their buildings, which means they will have to take responsibility for decision making. Disputes over costs, maintenance, and responsibilities could arise, especially in large developments.
⚠️ Financial Contributions and Risks – While leaseholders complain about service charges under freeholders, managing a building under a commonhold still requires collective contributions. If some owners struggle to pay, it could create financial difficulties for the whole building. I am sure the government will introduce legislation to mitigate this.
⚠️ Lack of Developer Support – Some property developers and freeholders argue that leasehold management is more effective for large, complex apartment buildings. Some say a shift to commonhold might lead to reduced construction of flats, pushing up property prices. I believe this is a scare tactic from new home builders, and even if it were true, I would say the prices of flats have been steady for the last decade, so this could be a welcome bonus for homeowners.
⚠️ Uncertainty for Existing Leaseholders – The Government has promised an easier conversion process, but the details remain unclear. Converting existing buildings to commonhold may require legal and financial hurdles that could slow progress.
What Does This Mean for Erdington Leasehold Homeowners?
If you own a leasehold property in Erdington and are considering selling, these changes could bring both opportunities and considerations:
- Market Evolution – As the transition to commonhold progresses, buyers may have more questions about leasehold properties. Clear communication about the benefits of your property—such as professional management and established maintenance structures—can help reassure potential buyers.
- Future Appeal – While commonhold will become the standard for new developments, well-managed leasehold properties will still hold value, especially if they offer competitive service charges and a straightforward path to extending leases or converting in the future.
- Local Market Trends in Erdington – The impact of these changes will vary by area. In locations where leasehold flats are common, buyers will continue to see them as a viable option, particularly where pricing and amenities remain attractive.
By understanding these shifts and positioning your property effectively, you can ensure a smooth and successful sale.
To give you an idea of the numbers we are talking about, the Erdington and surrounding area leasehold stats are as follows…
- B23 – there are 4,862 leasehold properties, which represents 26.07% of all the households in B23.
- B24 – there are 3,367 leasehold properties, which represents 28.21% of all the households in B24.
For those considering selling, now might be the right time to act before uncertainty around leasehold reform affects buyer sentiment. At the same time, sellers with well managed leasehold properties should highlight the advantages they still offer, such as professional building management and structured maintenance plans.
Final Thoughts
The government’s move to abolish and replace leaseholds with commonholds is a significant shift in the property market. While the changes promise fairer homeownership, they also bring challenges that will take time to resolve.
Understanding these changes is crucial for Erdington sellers. While some may worry about how leasehold properties will be perceived, others may find opportunities in marketing their Erdington homes proactively before the transition accelerates.
If you’re planning to sell an Erdington leasehold property, it’s important to keep informed about how these changes develop and seek advice on how best to position your Erdington home in the market.
The leasehold system may be coming to an end, but the transition will take time—and for those selling now, the key is to stay ahead of the curve. Should you have any questions about anything in this or any of my other articles on the Erdington property market, please do not hesitate to give me a call or drop me a direct message.