Leasehold and commonhold reform: what is the latest?
min readOn 24 July 2023, Michael Gove, the Secretary of State for Levelling Up, Housing and Communities gave a speech setting out the long-term plan for housing. It is clear that leasehold and commonhold reform remains high on the Government’s list of priorities. Michael Gove confirmed that reforms to leasehold law will be brought forward during the King’s Speech on 7 November 2023 and new legislation will be announced. On 5 July 2023, in the House of Commons, Rachel Maclean, the Minister of State, Department for Levelling Up, Housing and Communities also confirmed that reforms to leasehold and commonhold would be introduced in the King’s Speech “so the reforms should take place within this Parliament.”
A House of Commons Library briefing from February 2023: “Leasehold Reform in England and Wales: what’s happening and when?”, set out a list of what the Government says will be included in future leasehold reform legislation, including the following:
- Reform the valuation process for lease extensions and enfranchisement.
- Abolish marriage value (an element of the calculation of a lease extension premium).
- Create an online premium calculator for lease extensions.
- Simplify and standardise the enfranchisement process.
- Grant leaseholders of flats and houses the right to extend their lease for a term of 990 years (currently 90 and 50 years respectively).
- Enable existing leaseholders to buy out the ground rent without extending the lease.
Media coverage in May indicated that the Government’s earlier plans to abolish leasehold completely had been dropped. Abolishing leasehold would have been an incredibly difficult, near impossible task, given the number of leasehold properties and the fact that the main alternative, commonhold, has seen minimal take up since its introduction in 2004. The latest Government figures on the number of leaseholds in 2021/22, published in May 2023, estimated that there are 4.98 million leasehold dwellings in England, of which there are 3.5 million leasehold flats. That data also shows an increase in leasehold dwellings from 4.65 million in 2019/20 to 4.98 million in 2021/22.
In July 2020, the Law Commission recommended a push to commonhold as the alternative to the leasehold system. It identified a number of significant challenges around conversion to commonhold and suggested that the Government would either need to introduce compulsory commonhold for new flats or financial incentives for developers. The Government’s formal response to the Law Commission’s reports is awaited. Michael’s Gove’s recent speech on housing makes no mention of abolishing leasehold, only plans to reform it.
Whilst there has been much press coverage in the first half of 2023 on the reforms to the leasehold system, landlords and tenants will await more details in both further Government announcements and draft legislation later in the year to flesh out the Government’s plans.
In the meantime, we are tracking developments on our Essential Residential Hub and our timeline: Changing landscapes in residential leasehold.
Please do not hesitate to contact Lauren Fraser, Natalie Deuchar, Laura Bushaway or your usual Charles Russell Speechlys contact if you have any queries.
For flatted developments, we want to reinvigorate commonhold so that it can become a mainstream and widespread freehold alternative to leasehold for both new and existing flats. Again, we are reviewing the Law Commission’s detailed recommendations, which propose legal fixes that will make commonhold a desirable alternative in more and more settings.
