Commonhold and Leasehold Reform Bill: How It Could Affect Your Property Sale or Purchase

Last week, Prime Minister Kier Starmer announced the draft Commonhold and Leasehold Reform Bill.

This proposal will have a fundamental impact on homeownership for leaseholders across England and Wales. But how will it affect you buying or selling a property, particularly a flat?

What Are The Proposals?

• Ground rent will be capped at £250 a year (ultimately reduced to a peppercorn after 40 years)
• Forfeiture will be abolished and a new system introduced
• New processes to make converting from a leasehold to a commonhold easier
• Banning new leasehold flats
• Increased transparency

Will I Still Be Able to Buy and Sell a Leasehold?

Yes, you will. The ban on new leasehold flats will only come into force once the reformed commonhold framework is fully operational. Therefore, flats will continue to be bought and sold as leasehold, and our conveyancing team will continue to advise on lease terms, service charges and management arrangements.

However, the bill does aim to end the sale of new leasehold flats and promote commonhold ownership developments.

What is a Commonhold?

A commonhold is just a different way of owning your flat. It allows you to own your flat outright as Freehold, without having a landlord. Instead, the flat owners will collectively manage the building through a ‘commonhold association’ which deals with the common areas and shared responsibilities.

If you are buying a commonhold, it is seen as more transparent.

• Service charges and building costs will be clearer, reducing the surprise of any unforeseen fees or unexplained hikes. As a leasehold, landlords have almost full control of the upkeep and management of homes and the charges they pay.
• The bill will enable improvements to be made via regulation to the information and costs for prospective buyers of a commonhold unit to help them ahead of making a purchase.

If you are selling, a commonhold may be easier to sell.

• This new bill predominantly aims to release leaseholders from being in a position where they cannot sell their property due to excessive ground rents.
• It aims to grant the owners of flats greater security and control over their properties

Will My Leasehold Block Convert to a Commonhold?

Although the Bill makes it easier for existing blocks of flats to convert from leasehold to commonhold, this does not happen automatically; there will be certain criteria to be met and a unanimous decision from the leaseholders in the block.

Ground Rents and Fairer Lease Terms

The bill proposes further reforms to make current leasehold ownership fairer, including:

• Capping ground rents to £250
• Abolition of forfeiture – the risk of losing a property for small arrears

As a buyer, these changes may reduce long-term costs and improve mortgage lender confidence in lending on properties with estate rent charges.

As a seller, it will make properties with historic ground rent clauses easier to sell and reduce the need for indemnity insurance in some cases, making your conveyancing process easier, quicker and incur fewer costs.

Will The Proposed New Implications Delay My Sale or Purchase?

In most cases, no immediate delay is expected, and this proposal is intended to have the opposite effect. Commonhold buildings will have universal provisions, which will ensure buyers and conveyancers are clear on the obligations of living in a commonhold.

However, adjustments during the transition period may have an impact. For example: –

• New build flats may involve unfamiliar documentation
• Lenders may have specific requirements for commonhold properties
• Buyers may have more questions, particularly first-time buyers

These proposed reforms are designed to improve fairness and transparency and make buying and selling a leasehold more appealing, not disrupt your property transaction.

If you are considering a move, and you want clear, practical advice tailored to you, our conveyancing team at Wilson Browne Solicitors would be happy to be all the help you need.

Contact our Residential Conveyancing team today, or call 0800 886 004.