Commonhold reform: greater control cannot come at the cost of greater uncertainty

The Government’s draft Commonhold and Leasehold Reform Bill has the potential to change residential ownership in England and Wales more fundamentally than any legislation in decades.

Its ambition is clear: to make commonhold the default tenure for most new flats, make it easier for existing leasehold buildings to convert, and cap ground rents in existing leases before reducing them to a peppercorn over time.

The Housing, Communities and Local Government Committee has examined the proposals, concluding that while the draft Bill is a significant step towards greater leaseholder control, further work is needed before it can deliver in practice.

There is much we support about this goal. Leaseholders should have confidence in the ownership and management of their homes, greater transparency over costs, and workable routes to extend leases or buy their building’s freehold.

But reform of this scale cannot be judged on policy ambition alone. It must work in practice for leaseholders, freeholders and the professionals advising them. Important questions remain unanswered.

Changing tenure does not make risk disappear

Commonhold is often presented as the solution to the frustrations of leasehold ownership. It may offer homeowners a greater say in how their building is managed, and remove the involvement of a third-party freeholder in many future developments.

However, a change of tenure doesn’t make the cost or complexity of running a building disappear. Instead, it changes where those responsibilities sit.

Blocks of flats will still require repairs, insurance, long-term maintenance, careful budgeting and adequately funded reserves. Under commonhold, those decisions sit more directly with the owners themselves, acting collectively through a commonhold association and, where appointed, its managing agent.

That may sound empowering, but it is also a significant responsibility. The success of commonhold will depend on residents understanding not only the rights they gain, but the financial and governance obligations that follow.

In principle, commonhold is compelling. The issue is whether the legislation provides a framework homeowners can understand, operate and trust over the long term.

Consent must remain central to conversion

One of the Committee’s most significant recommendations is that conversion to commonhold should become the default outcome following collective enfranchisement.

While intended to simplify the process and increase take-up, it raises important questions for those who do not wish to participate. Under the draft proposals, conversion may proceed where at least 50% of qualifying leaseholders agree.

Yet non-participating leaseholders may still find that their rights, obligations and future position change materially under the new regime.

This is not simply a technical issue. It goes to the heart of consent, fairness and confidence in the conversion process. Aligning rules across a converted building may be practical, but that does not remove the need for protection. A homeowner who has not chosen commonhold could still face changes to legal rights, financial obligations and the marketability of their property.

Before conversion becomes the default, the Government must set out clearly how those residents will be protected and how any impact on value and the conveyancing process will be addressed. Otherwise, a reform intended to empower leaseholders risks leaving some feeling that decisions about their property have been taken without their consent.

Cost and valuation cannot be an afterthought

The Committee has welcomed the proposed cap of £250 a year on existing ground rents, while urging faster implementation and clearer justification for the proposed 40-year transition to peppercorn rents.

Greater control of ground rent liabilities will be welcome for many leaseholders. But these proposals sit alongside reforms already introduced through the Leasehold and Freehold Reform Act 2024, including changes to enfranchisement and lease extensions. The interaction between the two regimes needs careful consideration.

Ground rent is not only a household cost; it also contributes to the valuation of freehold interests and investment assets. Retrospective changes to contractual terms may therefore have broader consequences than the immediate relief they provide.

Similar questions arise around development value. The Committee has suggested allowing leaseholders to defer payment by accepting restrictions on future development. While this may reduce upfront costs, assessing a fair payment later could prove complex – particularly where future development may range from modest additions to substantial new space.

Reform should make enfranchisement more accessible, while setting clear expectations around risk, value and fair compensation.

Better management will require effective regulation

The Committee is also right to return attention to the regulation of property managing agents.

For residents in blocks of flats, the quality of management can be as important as the ownership structure itself. Commonhold will not remove the need for skilled management; in many cases, it will make professional, transparent and accountable management even more important.

We support effective regulation of property managing agents, but the detail matters. A credible framework will need appropriate standards, meaningful enforcement and clarity about how poor performance is addressed. Simply creating new responsibilities without the machinery to uphold them would not deliver the confidence homeowners need.

A reform programme that earns confidence

The draft Bill is part of a much wider reform programme. Leaseholders, freeholders, valuers, managing agents and advisers are already navigating changes introduced through earlier legislation, with further changes now proposed to tenure, ground rents, building management and enfranchisement.

That makes sequencing and clarity essential. The Government has an opportunity to create a more transparent and workable system of flat ownership. But the final Bill must do more than promise control – it must show how:

• Commonhold will function in real buildings
• Non-consenting leaseholders will be protected
• Value will be assessed fairly
• Effective management will be secured.

The direction of reform may be clear. The consequences are not yet clear enough. Without that clarity, reform risks redistributing uncertainty rather than resolving it.

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