In March 2025, the UK Government released a Commonhold White Paper outlining its proposal for sweeping reforms to flat ownership law, designed to end new residential leaseholds and make commonhold the default ownership model.
Commonhold was introduced by the Commonhold and Leasehold Reform Act 2002 and allows for the outright ownership of flats while sharing responsibility for communal areas via a commonhold association (CA) made up of the flat owners. Commonhold has existed in law for over two decades, but adoption has been slow due to legal, financial and commercial barriers.
Currently, leasehold dominates flat ownership, where a landlord (often a developer or investor) owns the freehold and grants long leases to buyers of the individual units. The individual owners pay ground rent, service charges and other fees, which for developers and commercial landlords provides a predictable revenue stream and long-term control over the property.
This White Paper delivers on a manifesto pledge to abolish the traditional leasehold system for new developments, starting with new-build flats. The proposals represent a significant structural shift in property law and are likely to have far-reaching impacts for property developers, commercial landlords and those who finance real estate developments.
Importantly, the focus is on practical changes to make commonhold workable at scale, rather than on ground rents, which have already been largely abolished for new leases under the Leasehold Reform (Ground Rent) Act 2022.
Key reforms outlined in the Commonhold White Paper
The White Paper proposes a ban on the sale of new leasehold flats, with commonhold becoming the default form of ownership. It outlines detailed legal and practical reforms to make commonhold viable for a wide range of developments, including mixed-use and phased schemes.
Key changes include:
- The introduction of ‘sections’ within commonhold will allow different parts (e.g., commercial and residential) to be managed separately.
- Standardisation of the Commonhold Community Statement (CCS), improving transparency and marketability.
- Permission for certain long leases, such as shared ownership and equity release schemes, to exist within commonholds.
- Greater flexibility for developers to retain rights to build in phases and manage the handover of control.
- Mandatory reserve funds, democratic budget setting and thresholds for high-cost spending to ensure sound financial governance.
- New enforcement mechanisms for arrears and rules enabling commonhold associations to borrow funds for major works.
Implications for Developers
Developers will no longer be able to sell leasehold flats or monetise freehold reversions. While this reduces traditional revenue streams, it also removes some legal complexities and offers scope for cleaner, more transparent sales.
The White Paper provides for greater flexibility for development rights, with developers able to reserve whatever rights they need in the Commonhold Community Statement (CCS) – the governing document – such as rights to add new units in later phases or reconfigure parts of the site.
The ability to include shared ownership units and retain key rights in the CCS offers developers flexibility in structuring projects. With the appropriate preparation, developers may find that the commonhold model can support their commercial goals as well as leasehold did, once market familiarity improves.
Implications for Landlords and Estate Managers
Existing leasehold buildings remain unaffected for now, but the long-term trend is clear: the leasehold model is being phased out. Estate managers and landlords will need to rethink their business models, especially as opportunities to manage new leasehold sites decline.
While the loss of landlord control will be unwelcome in some quarters, there may be opportunities for landlords and agents to offer consultancy and management services to commonhold associations. Helping owners navigate their obligations, budgets, and building upkeep could offer new revenue streams.
Implications for Funders
The commonhold model initially raised concerns amongst lenders about enforcement and recoverability of their funds. However, the White Paper includes safeguards to reassure the sector, such as giving mortgage lenders rights to pay arrears and add them to the mortgage, control unit sales, or repossess properties in default.
Mandatory reserve funds and the ability for associations to take secured loans, further improve financial viability and long-term maintenance prospects. With increased clarity, lenders may prefer commonhold over leasehold as a simpler, perpetual form of tenure.
The changes proposed to the commonhold model aims to further reassure lenders that lending on a commonhold unit presents no more risk than lending on a leasehold flat and should additionally have benefits over and above leasehold for them.
These include reforms to:
- a) Ensure fair and effective enforcement of financial breaches of the CCS;
b) Protection of a lender’s stake in the building (e.g. a role for lenders as a last resort to step in and apply to the Tribunal to appoint a director or replace a failing one);
c) Ensuring the solvency of the commonhold association (e.g. compulsory public liability insurance and reserve funds as well as enabling unit owners to approve annual budgets to keep costs affordable);
d) New powers to raise funds when responding to emergencies; and
e) Safeguards around voluntary termination.
Operational Considerations
It is clear that the transition to commonhold will take time, with education and market confidence critical to its successful implementation. There are operational challenges to address, such as ensuring owners understand their responsibilities, navigating governance disputes and dealing with arrears or emergency repairs.
However, the proposed structure builds in safeguards, transparency and dispute resolution mechanisms, with Tribunals, rather than courts, poised to address most issues to help streamline the process.
In addition, the transfer of responsibilities to a commonhold association poses governance challenges too. The CA replaces the landlord in a leasehold model, which means no external party collects ground rent or controls the building, with all owners sharing management responsibility.
That’s great for empowerment, but it does come with risks if the owners aren’t engaged or well-organised, which is why some argue that managing agents may still be important in the future. Still, the success of commonhold will depend heavily on motivated and informed owners, willing to assume the responsibilities that landlords or agents once held.
Conclusion
The Commonhold White Paper signals the Government’s clear intent to retire the leasehold system and place flat ownership firmly in the hands of the residents. Developers, landlords, and funders should not see this as a threat, but as a shift in the legal landscape – one that admittedly comes with new risks, but also new opportunities.
By preparing early, engaging with the reforms and considering how their roles can evolve, stakeholders can help shape the future of flat ownership and benefit from a more transparent, stable and ultimately fairer system.
If you have concerns that could benefit from a discussion with an experienced legal team, please contact our Commercial Property team today on 01752 292201 and they’ll talk you through your options.