Restoring balance to Britain’s property debate

Leasehold has rarely been out of the news in recent years, and for good reason. The Leasehold and Freehold Reform Act 2024, rushed through Parliament in the pre-election wash-up, marked a significant - though incomplete - shift in the power balance between freeholders and leaseholders. Now, all eyes are on the next stage: the imminent Leasehold and Commonhold Reform Bill, which could mark an even more fundamental turning point if it fulfils the government’s ambition to make commonhold the default tenure for new-build flats.

At the heart of this reform drive lies a valid concern: leaseholders should not be exposed to opaque service charges, onerous ground rents or mismanagement. However, as the debate has unfolded, particularly in the consumer press but also, more recently in the property trade press, it has become increasingly emotional and worryingly unbalanced.

The dominant narrative portrays leasehold as a “feudal” relic, a system riddled with abuses and stacked against ordinary homeowners. The term “fleecehold” has entered common usage, repeatedly so by government. It is invoked to condemn everything including service charge disputes, managing agents as well as lease extension and freehold purchase premiums. Yet this language masks complexity and risk. In the rush to reform leasehold, we risk ignoring the voices of professionals, lenders, managing agents and responsible freeholders - and with them, the practicalities that underpin the UK’s existing flat ownership model.

The cost of sensationalism

When it comes to property, the most extreme stories tend to grab the headlines. In leasehold, that has meant a focus on worst-case scenarios: spiralling service charges, insurance commission scandals and freeholders who behave unreasonably with lease extension and enfranchisement claims, or resist transparency. These stories matter. But they are far from typical. The vast majority of leasehold relationships function as intended - imperfect but workable.

Unfortunately, the rise in negative media coverage has created anxiety in the market. Flat owners report difficulties selling, not because of specific problems with their lease but because of a generalised distrust of the leasehold model. There is greater scrutiny of ground rents following the ground rent scandal. This focus highlighted some appalling ground rent clauses in leases, and it created much needed awareness of the problems. However, scaremongering also led to unnecessary anxiety and stress concerning those ground rents which were not onerous. 

When ALEP (the Association of Leasehold Enfranchisement Practitioners) surveyed its members on the state of the market recently, 50% said that the speed at which clients were taking decisions on leasehold enfranchisement had reduced; while 67% said that the process of extending a lease had not become easier following the enactment of LAFRA (none said that it had become easier).

This fear is compounded by a lack of education and legal clarity: ambiguous lease clauses, poor legal advice in some cases and unregulated managing agents all contribute to confusion and concern. 

Leasehold reform must, of course, address these issues. But reform should not mean rejection. Leasehold - particularly when underpinned by modern, clearly drafted leases and good governance - can and does work. What it needs is not abolition, but improvement: greater transparency, tighter regulation of managing agents, and clearer guidance for homeowners. We need to see greater resources and information available, particularly for leaseholders, to help understand the current system. 

The legal and market risks of overreach

Rushed legislation carries risk. The Leasehold and Freehold Reform Act 2024 is already the subject of a Human Rights challenges. John Lyon’s Charity, Cadogan Estates and others have brought High Court proceedings arguing that aspects of the Act, including the removal of marriage value and the capping of ground rents (for premiums), amount to an infringement of their rights to enjoy their property as set out in the European Convention Of Human Rights. 

Meanwhile, professional advisers are fielding more enquiries from clients unsure of how to proceed with leasehold sales or enfranchisement claims, amid ongoing legal uncertainty. In some cases, leaseholders themselves are unaware of their obligations - for example, the need for Section 20 consultations for qualifying works, or the roles and responsibilities associated with share of freehold. Misunderstandings are common, and under-resourced conveyancing practices often fail to fill the gap.

Commonhold is not immune to these issues. In theory, it offers a democratic alternative to leasehold: no ground rents, no external landlord. But in practice, it remains untested. Only a handful of commonholds have ever been created in England and Wales since its legal introduction in 2002. Lenders are cautious due to the lack of a proven management and governance framework and concerns over their security especially since there is currently no right to forfeit a commonhold unit for a breach. Scotland’s experience has seen significant challenges.

A call for realism and reform

Leasehold is far from perfect. But to treat it as beyond saving - or to present commonhold as a panacea - is misguided. There are practical, incremental ways to reform leasehold that reflect how people actually live and buy property.

The recent simplification of Right to Manage, for instance, makes it easier and cheaper for leaseholders to take control of their buildings. Clearer lease drafting, greater education at the point of sale and better regulation of managing agents would do more to improve outcomes than a wholesale switch to an untested system. In time, commonhold may evolve to become a more viable option. But that is no reason to dismiss the system currently in use by millions.

It is natural, at moments of major reform, to paint the status quo in the worst possible light. But the risk of such distortion is that the legislation it inspires is itself distorted. Unfortunately, law is littered with well-meaning policies that falter in practice. The emerging Leasehold and Commonhold Reform Bill must not become the next.

If we want reform that works, we must restore balance to the debate. That means recognising the flaws in leasehold - but also the strengths. It means listening to leaseholders and freeholders, to the legal and lending professions as well as campaigners and consumer groups.