The 2024 Leasehold and Freehold Reform Act

Freehold vs Leasehold

Outlined here in one of our supporting pages, freehold ownership is inclusive of all the property, as well as the land itself, and it is not limited by a time frame.

On the other hand, a leasehold ownership structure is bound by a set period of time and does not include the land the property is on. Once the leasehold ends, ownership of the property returns to the freehold owner.

Historical context

Michael Gove had attempted to introduce major reforms during Rishi Sunak’s government, such as limits on ground rents, but after facing pressure from investors and pension funds, a weekend version of the bill ended up being hurried through.

The Leasehold Knowledge Partnership stated setting ground rents to zero, as originally proposed, would have likely triggered “litigation from freehold owners on human rights grounds”, violating their rights to fair compensation and potentially resulting in costly and complex litigation.

Commonhold system

As an alternative to leasehold, commonhold was introduced back in 2002, allowing for shared ownership and management of multi-occupancy buildings by splitting responsibilities of common areas and maintenance services.

The system never took off as it failed to gain traction amid resistance from those who benefited from leasehold arrangements and profited from high ground rents and control over property management.

Announced reforms

Keir Starmer’s  new Government will introduce a new legal framework, announcing their intention to "bring the feudal leasehold system to an end", replacing it with commonhold and banning the sale of new leasehold flats, though no specific timeframe has been set yet.

This will allow issues such as unregulated ground rents and the threat of repossession to be addressed, by expanding the act following recommendations from the Law Commission.

Overall, these reforms should be met very positively as it should encourage greater confidence within those looking to buy or sell leasehold property, removing uncertainty.