Writing in Landlord Today, Clive Scrivener, a partner at Scrivener Tibbatts and a member of ALEP (Association of Leasehold Enfranchisement Practitioners) warns that the government’s ambitious move to phase out new leasehold flats in favour of commonhold has sent tremors through the UK property sector. While the intention to protect homeowners from exploitation is commendable, many experts are warning that an outright ban risks fracturing the housing market and dismantling a proven legal framework for multi-occupancy buildings.

The Problem with the Purge

For centuries, the leasehold system has provided a clear, workable structure for blocks of flats. By their very nature, flats require communal management—coordinating shared structures, maintenance schedules, building insurance, and ensuring compliance with fire and safety regulations. The freeholder (or head lessor) historically plays a crucial, central coordinating role, ensuring these essential long-term responsibilities are met.

The government correctly argues that this tenure system is often abused through opaque service charges, unjustified ground rents, and restrictive covenants. But the proposed “ban” risks throwing the baby out with the bathwater. The inherent function of leasehold is to create a responsible party for the entire building—a safeguard against negligence and dispute paralysis.

Commonhold: The Unproven Alternative

If leasehold is banned for new flats, the only immediate viable alternative is commonhold. Introduced in the UK via the Commonhold and Leasehold Reform Act 2002, this model has fundamentally failed to gain meaningful traction in over two decades.

Developers, lenders, and managing agents remain deeply cautious of commonhold for several reasons:

• Lack of Central Control: Commonhold relies entirely on a shared “Commonhold Association” managed by the residents. This structure, lacking a single controlling entity like a freeholder, is often viewed as impractical for large blocks with dozens or hundreds of owners.
• Escalation of Disputes: Without a freeholder with clear legal authority to intervene, disputes over spending priorities or urgent repairs can escalate quickly into legal paralysis.
• Lender Caution: Mortgage providers and conveyancers remain wary of commonhold due to its lack of flexibility and its untested nature.

Creating a Two-Tier Housing Market

Practical implementation of commonhold reform lags far behind the political rhetoric. The immediate danger is that the market will divide into two unequal segments:

1. Older Leasehold Flats: Held on established, tried-and-tested legal structures that lenders and conveyancers understand.
2. New Commonhold Units: Sold under untested, inconsistent, and lender-cautious frameworks.

This distortion could see purchasers, mortgage providers, and even conveyancers viewing new commonhold units as inherently riskier or less saleable, potentially depressing their market value relative to traditional leasehold flats. This instability is the last thing the housing sector needs.

The Management Quality Crisis

Removing professional freeholders entirely leaves the long-term governance of complex buildings in the hands of resident-led associations. While resident empowerment is desirable, practical experience shows this transition is fraught with difficulty.

As our experience with Right to Manage (RTM) groups demonstrates, self-management is often far more time-consuming and demanding than anticipated. When owners lack the expertise, time, or willingness to act collectively, especially when faced with disagreements over major spending (such as cladding remediation or lift replacement), governance can easily break down. Professional asset managers and specialist freeholders play a vital role in safeguarding standards that residents may not be equipped to deliver.

The Path Forward: Regulation, Not Ruin

A more balanced, pragmatic reform would be to retain leasehold for flats but subject it to significantly stricter regulation. This approach would address the genuine abuses without dismantling a functioning tenure system.

Reforms could include:

• Transparent Service Charges: Enforceable laws ensuring clarity and justification for all charges.
• Caps on Ground Rents: Limiting ground rents to a peppercorn, or zero, for existing and new leases.
• Streamlined Tenant Rights: While leaseholders already have the framework to extend leases and seek to take over management under the 1993 Act, simplifying and reducing the cost of these processes would go a long way.

The government’s goal should be fairness, not dogma. Leasehold, properly regulated and stripped of its opportunistic elements, remains an efficient and proven structure for complex residential buildings. Banning it entirely could do far more harm than good—creating uncertainty, stifling development, and ultimately dividing the flat market into two unequal halves.

The lesson from history is clear: reform systems that fail, but don’t destroy the ones that work. Leasehold, when regulated responsibly, is a system that works.

The original article can be seen here