As the government presses ahead with plans to ban new leasehold flats through the introduction of commonhold, many in the property industry are sounding the alarm. While the intention to protect homeowners from poor practice is laudable, the unintended consequences of an outright ban on leasehold flats could be profound, creating a divided and unstable housing market for decades to come.
The government’s argument is that leasehold is too often abused. Ground rents, opaque service charges and restrictive covenants have damaged the reputation of a trusted tenure system. But the proposed “ban” on new leasehold flats risks throwing the baby out with the bathwater. For centuries, leasehold ownership has provided a clear and workable legal framework for multi-occupancy buildings, especially where shared structure, maintenance and insurance obligations are complex. Flats, by their very nature, require communal management. The freehold structure, which some reformers champion as a universal solution, is often impractical when a building has dozens or even hundreds of individual owners. The freeholder (or head lessor) plays a crucial coordinating role — ensuring buildings are insured, maintained, and compliant with fire and safety regulations. Without that layer of responsibility and accountability, the risk of neglect, dispute, and legal paralysis increases sharply.
If leasehold tenure is banned for new flats, the only, current, viable alternative will be commonhold – a model that, despite being introduced in 2002, has failed to gain meaningful traction. Developers, lenders, and managing agents remain wary of commonhold’s limitations: its lack of flexibility, the absence of a single controlling entity and the potential for disputes to escalate quickly in the absence of a freeholder with legal authority. Commonhold reform is on the government’s agenda, but practical implementation lags far behind the political rhetoric. The danger is that we could end up with a “two-tier” market: older flats held on tried-and-tested leasehold structures, and new flats sold as commonhold under untested, inconsistent and lender-cautious frameworks.
