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King’s Speech pledges to ban new leasehold flats so commonhold becomes default tenure
The government has promised to publish draft legislation on leasehold and commonhold reform, and ban the sale of new leasehold flats so commonhold becomes the default tenure.
The pledge for a draft leasehold and commonhold reform bill was included in the King’s Speech at the state opening of parliament on 17 July.
Briefing documents published alongside the King’s Speech said the government would “act quickly” to implement provisions in the Leasehold and Freehold Reform Act 2024, which was devised by the previous Conservative government and passed just before this month’s general election.
Next, ministers will “further reform the leasehold system” through a new bill. This law will enact the remaining recommendations made by the Law Commission in 2020 on how to improve the tenure. These included strengthening leaseholders’ rights to extend their lease and buy their freehold – known as enfranchisement – and take over their freeholder’s building management functions, known as Right to Manage.
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The bill will also “reinvigorate” commonhold, a tenure that has existed on the statute books as an alternative to leasehold since 2022 but “failed to take off”. The bill will do this by modernising the legal framework and restricting the sale of new leasehold flats.
Today there are fewer than 20 commonhold blocks in England and Wales. According to the government, the commonhold legal framework is “out of sync” with modern development methods, and the current rules around conversion from leasehold to commonhold are “unworkable”.
The government will consult on the best way to achieve this, so that generations to come will “benefit from absolute homeownership,” the document said.
The new bill will also tackle existing ground rents, which the government described as “unregulated and unaffordable”. It will regulate ground rents for existing leaseholders so they no longer face such costs.
Ministers estimate that 86% of leaseholders pay a ground rent to their freeholder, averaging almost £300 a year in England. Ground rent contracts can rapidly escalate, meaning they can become unaffordable over time for leaseholders.
The bill will also end the “injustice” of so-called “fleecehold” private estates and unfair costs. The government will consult on the best way to achieve this and implement new protections for homeowners on private estates contained in the existing Leasehold and Freehold Reform Act 2024.
There are around 1.75 million leasehold homes on private estates, and the number being built has grown in recent years.
The bill will end the “disproportionate and draconian threat” of forfeiture as a means of ensuring compliance with a lease agreement, so that leaseholders are protected against losing savings they have in their home for potentially small unpaid debts.
Leasehold law rewards the freehold with a windfall when they take possession of a property through forfeiture. Many more leaseholders are threatened with forfeiture and the loss of their home for low outstanding sums, which can cause “significant distress”.
The government acknowledged that landlords “need an effective way to recover debts”, but the fact this can happen over what might be a small breach “underlines its draconian nature”.
The document added that the government will then “take steps to bring the feudal leasehold system to an end”, reinvigorating commonhold through a “comprehensive new legal framework” and banning the sale of new leasehold flats so commonhold becomes the default tenure.
There are around five million leasehold homes in England and Wales, including 3.4 million flats in England.
Harry Scoffin, founder of campaign group Free Leaseholders, said the King’s Speech was “a fantastic moment for leaseholders”.
He said: “It is an end of history moment for the medieval leasehold system in England and Wales. The new Labour government has pledged speedy enactment of the provisions contained within the Leasehold and Freehold Reform Act 2024 that made the pre-election wash-up, ending sector speculation and giving greater certainty to leaseholders over new rights.
“Beyond that, there will be draft legislation to ban new leasehold flats and unshackle millions of existing leaseholders with second generation commonhold for democratic self-rule. As far as leaseholders are concerned, [Sir Keir] Starmer’s government is taking on the vested interests and hitting the ground running.”
Katie Kendrick, founder of the National Leasehold Campaign, said: “Over the years we have heard many Queen’s/King’s speeches promising reforms, but today’s commitment from the new government feels different. It feels like meaningful change is eventually going to be delivered.
"It’s fantastic to see that the government shares our vision to bring the feudal leasehold system to an end and wants to ban the sale of new leasehold flats so commonhold becomes the default tenure".
She added: "It’s refreshing to know that the new government is determined to pick up the outstanding issues, tackle them head on and deliver once and for all".
Mick Platt, director at the Residential Freehold Association, said: "We await further details of the government’s plans but welcome their recognition that there is more to be done to address the real concerns of leaseholders, such as rising service charges and the regulation of managing agents.
“While we support proposals to enact the Law Commission’s recommendations, the government must ensure that any legislation does not retrospectively interfere with the legitimate investments of institutional investors, including professional freeholders and pension funds."
