Commonhold reform requires more clarity

The Association of Leasehold Enfranchisement Practitioners (ALEP) has expressed support for the House of Commons Housing, Communities and Local Government Committee’s report on the draft Commonhold and Leasehold Reform Bill. However, they caution that for the reform to succeed, it is imperative to have clear communication, practical details, and a realistic timetable for implementation. The Committee’s report highlights that the draft Bill is a significant step towards replacing leasehold with commonhold, ultimately empowering homeowners with increased control over their properties. ALEP agrees that this legislative change presents a valuable opportunity to enhance the homeownership experience for leaseholders during this Parliament.

Despite the optimism surrounding the proposed reforms, ALEP echoes the Committee’s concerns regarding the Government’s promise to “bring the feudal leasehold system to an end.” This commitment has led to mixed expectations among leaseholders about the legislation's potential and the speed at which changes will occur. Mark Chick, ALEP director and Senior Partner at Bishop & Sewell LLP, remarked that the Bill's passage will not lead to an immediate end of leasehold. Many existing leaseholders may find it challenging to convert to commonhold in the near future, with the possibility of it taking several years before commonhold becomes mandatory for new flats. Furthermore, existing flats will have to undergo the leasehold enfranchisement process before conversion, and some forms of leasehold ownership, like shared ownership flats, are likely to remain as permitted leases.

Chick stresses the need for realistic expectations regarding the pace of reform, stating, “The changes certainly will not be quick. In practice, it may be several years before commonhold is mandated and, across parts of the market, it could be closer to a decade before commonhold is fully embedded and widely understood.” He emphasises the importance of customer education and managing expectations to prevent homeowners from opting for commonhold under the misconception that it is an effortless decision.

In line with the Committee’s recommendations, ALEP suggests that conversion to commonhold should be the default outcome of collective enfranchisement. This approach could simplify the transition away from leasehold, provided the Bill clearly outlines how the costs involved in acquiring the freehold and converting to commonhold should be equitably shared among leaseholders. During his oral evidence to the Committee, Chick raised concerns about the valuation of interests such as development value, emphasising that “Conversions could be discouraged if non-consenting leaseholders do not have to contribute anything towards the cost that the collective has endured to buy the freeholding in the first place.”

Looking ahead, Chick expressed anticipation for the Government’s strategy and timeline for implementation, which should encompass both the final Commonhold and Leasehold Reform Bill and the outstanding measures in the Leasehold and Freehold Reform Act. He concluded by commenting on the political momentum behind leasehold reform, stating, “The task for Government is to turn that momentum into legislation that practitioners can apply, leaseholders can understand and the market can trust. The detail is not secondary to the policy - it is what determines whether the policy can be delivered.”