The reinvigoration of commonhold

Monday morning saw a flurry of headlines proclaiming the "beginning of the end for the 'feudal' leasehold system" following the publication of a Government press release bearing the same title.

The press release was published in advance of a white paper which, while outlining the Government’s clear agenda to “reinvigorate” commonhold as the default form of tenure, recognises the need to provide a viable alternative to leasehold and falls short, at least for the time being, of banning the grant of new leasehold flats.

The white paper sets out the Government’s proposed new commonhold model for home ownership and acknowledges that for commonhold to succeed, developers must have confidence to designate developments as commonhold in place of leasehold, consumers must have the confidence to buy commonhold and lenders must have the confidence to lend on commonholds.

The white paper includes details of the particular aspects of the current commonhold regime that require review and includes a commitment to the introduction of a new legal framework for commonhold to be based on the majority of the recommendations made by the Law Commission in their 2020 commonhold report. This new framework will be contained in a draft Bill, to be published later this year, allowing time for legislative scrutiny before the publication of a new Leasehold and Commonhold Reform Bill. This will be accompanied by further Government consultation, also later this year, as to the best approach to imposing commonhold as the default tenure and the ban of the use of leasehold for new leasehold flats.

Whilst the task is not to be underestimated, and the timing is perhaps a little ambitious, the proposals set out in the white paper indicate that the Government is keen to build confidence in commonhold as a new form of tenure before making its use compulsory or encouraging existing leaseholders to convert. This is evidenced by the statement below, which includes a welcome stated intention to work with industry and consumer groups as well as promoting commonhold to consumers.

“We see having a viable commonhold model as the essential first step towards the development of a ban, so we will not ban the use of leasehold until we are confident that a viable alternative, through reformed commonhold, is in place.”

As we have seen with the current leasehold reforms, change is not always a quick process, and it remains to be seen if the confidence of developers, consumers and lenders can indeed be won and a viable and workable form of commonhold can be introduced.

The white paper can be read in full here: https://www.gov.uk/government/publications/commonhold-white-paper/commonhold-white-paper-the-proposed-new-commonhold-model-for-homeownership-in-england-and-wales