Discontinuation of Leasehold System: Will Reforms in the UK Abolish Its Ancient Feudal Construct?
The leasehold system in England and Wales, a common form of property ownership for flats, has been the subject of ongoing controversy due to its complexities and perceived unfairness towards leaseholders. Despite the passage of the Leasehold and Freehold Reform Act in May 2024, many of its provisions remain unimplemented, leaving homeowners in a state of uncertainty and frustration.
The Act, intended to simplify lease extension processes, extend standard lease lengths, and strengthen leaseholders' rights, has faced slow progress. Key reforms, such as lease extension pricing and freehold purchase rights, are still pending, causing unnecessary costs and legal uncertainties for leaseholders.
One of the most contentious issues surrounding leasehold properties is the practice of ground rents, fees paid annually by leaseholders to cover maintenance of communal areas and insurance, as well as a "ground-rent" fee. The Act aims to eliminate ground rents on leasehold properties, but concerns persist around transparency and fairness in service charges, valuation methods for enfranchisement premiums, building insurance costs, and enforcement mechanisms like forfeiture threats.
To address these issues, the government has proposed replacing long leasehold tenure with commonhold, a system where flat owners hold freehold interests collectively through commonhold associations. This change aims to increase owner control, eliminate ground rents, and reduce lease extension costs. However, the transition to commonhold is seen as a long-term goal and faces complex legal and practical challenges.
In London, there are 1.3 million leasehold dwellings, accounting for 36% of all dwellings in the city. The system has been criticised for being ripe for abuse by unscrupulous freeholders and their managing agents, with cases of excessive and spiraling "ground-rent" payments that trap leaseholders in their properties by making them unsellable, overcharging, and even paying themselves kick-backs on contracts.
To combat these issues, the UK government is passing a series of leasehold reforms. The new Leasehold and Commonhold Reform Bill, due this autumn, will end the granting of leasehold tenure for new properties, making commonhold the default. The Act also makes it cheaper and easier for leaseholders to extend their lease or buy their freehold, including by abolishing the requirement to pay marriage value.
Despite these reforms, the slow implementation and outstanding legal complexities mean many leaseholders remain in a state of uncertainty and frustration as of mid-2025. Government officials acknowledge that full implementation of the reforms will take "years not months," fueling reform fatigue among leaseholders eager for change. Further primary legislation may be required to fix deficiencies in the current Act, potentially delaying meaningful reform even further.
In summary, while the leasehold system reforms aim to create a fairer, more secure home ownership framework, their slow implementation and outstanding legal complexities mean many leaseholders remain in a state of uncertainty and frustration as of mid-2025.
The Leasehold and Freehold Reform Act of 2024, aimed at simplifying lease extension processes and strengthening leaseholders' rights, faces slow progress, with key reforms such as lease extension pricing and freehold purchase rights still pending, causing ongoing financial concerns for leaseholders. In the interim, concerns about transparency and fairness continue to surround service charges, valuation methods, building insurance costs, and enforcement mechanisms in the real-estate sector, particularly in systems like ground rents.
