Labour’s landmark leasehold reforms, which will cap ground rents at £250 a year and, ultimately, ban the sale of new leasehold flats, may not come into force until at least the 2030s.
Speaking at the Institute for Government, housing and planning minister Matthew Pennycook outlined his plan to end the leasehold/freehold system of homeownership in England and Wales, which has existed since the Doomsday Book was published in 1086 but took hold of Britain’s housing market in 1920, by transitioning to a system known as “commonhold”.
Pennycook said the leasehold system was causing “acute financial hardship and misery for huge numbers of [people] living in approximately five million leasehold dwellings” across England and Wales.”
In a leasehold system, homeowners do not really own their home; they merely own the right to lease it for a specified period of time and must pay ground rent as well as lease extension fees.
By contrast, in a commonhold system, individual flat owners within a building own their home as well as a share in the block that contains it, with no lease and no ground rent.
Pennycook told The i Paper that his plans will see “commonhold become the default tenure” of homeownership in England and Wales.
However, Pennycook added Leasehold and Commonhold Bill may not come into force in this Parliament because of its complexity, adding the bill has 260 clauses.
The minister spoke to The i Paper ahead of the Renters’ Rights Act, coming into force on Friday, in what will be the biggest shake-up of tenants’ rights in England and Wales since 1988.
Matthew Pennycook speaks to Vicky Spratt about leasehold reformThe Green Party of England and Wales has accused Labour of failing to deliver on its promises over leasehold reform. Green leader Zack Polanski claimed Labour is “more interested in pleasing property developers than freeing five million people from the financial burden of service charges”.
Polanski has said the Greens would “abolish” leasehold completely.
Pennycook described this pledge as a “glib soundbite” and said Labour’s reforms and transition to a commonhold system, which is standard in other countries, including the USA, Australia and France, as was an “ambitious” and “thought-through policy programme”.
“We do want to be ambitious. We’re going as fast as we possibly can, balancing speed with care,” Pennycook said.
“Anyone who knows anything about the leasehold system knows that immediately abolishing leasehold overnight is all but impossible.
“[The Greens have] not explained whether it’s lawful [to abolish leasehold]. What does it mean for the mortgage market? How do you practically overnight abolish circa five million leasehold and freehold titles, and replace them with commonhold titles?”
In Labour’s 2024 general election manifesto, the party promised to “finally bring the feudal leasehold system to an end”. Earlier this year, Sir Keir Starmer vowed millions of leaseholders would have their ground rents capped at £250 a year from 2028.
However, while Pennycook suggested that he expects the legislation to pass in this Parliament, which is due to run until 2029, he warned that the laws may not come into force until later.
Labour has faced a legal challenge from freeholders who have attempted to derail that legislation by arguing that it contravenes their “human rights”. The High Court initially rejected this challenge and ruled in favour of the Government. However, the freeholders have since been granted the right to appeal that decision.
Leasehold campaigners told The i Paper that they were frustrated with delays, which leave them with spiralling bills running into thousands of pounds and homes they often cannot sell.
The National Leasehold Campaign (NLC) said that “complexity is not the problem, delay is”.
The NLC said the current Government has been “honest about the challenges, realistic about what can be achieved, and clear about the direction of travel”, but added: “For existing leaseholders facing escalating costs, insecurity and daily stress, intent must rapidly turn into outcomes.”
Pennycook said some builders were “trying to get ahead” of the reforms by planning commonhold blocks of flats, adding there is “nothing stopping them” from building right away.
A spokesperson for the Residential Freehold Association, which represents the interests of freeholders, claimed Labour’s leasehold reforms risked “forcing” commonhold on to homeowners who do not want it.
“The minister highlights that rising service charges and a lack of transparency are leaseholders’ primary concerns. Yet long-promised reforms in this area – including regulation of managing agents recommended by Lord Best in 2019 – have still not been delivered,” the spokesperson said.
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