It can be difficult and off-putting for homebuyers to have to deal with the different ways a property’s land is held in England and Wales, but there are three different definitions they need to remember: freehold, leasehold, and commonhold.
Freehold means that the land is owned indefinitely, and the land can be used for any reason subject to legislation.
Leasehold means that the land is instead fixed for a period of time which can range between 99 to 999 years.
Finally, commonhold means that a freehold is shared. In 2002, the concept of commonhold was introduced as a means of allowing the freehold ownership of flats. Despite this, there have only been less than 20 commonhold developments that have been created ever since.
Most flats are leasehold in England and Wales, and a house can be leasehold too if anyone purchases a shared ownership property.
However, in many situations, service charges, particularly ground rent, can be too high in relation to what they are receiving. This is making leaseholding an increasingly unpopular option for many homebuyers in England and Wales.
Propertymark’s own research on leaseholding called Leasehold and Freehold Reform: what has changed?, which was updated in September 2024, discovered that 72 per cent of members queried believed that homebuyers are now less oblivious of the issues regarding leaseholds than they were five years ago.
Also, 60 per cent of respondents stated that buyers now ask for information about the lease before they visit a property.
One answer suggested by the paper was implementing a commonhold system, with the appointment of a block manager being an easy answer to thwart problems like dispute resolution and chasing contributions from other commonholders.
Prior to July’s general election, the last government quickly passed the Leasehold and Freehold Reform Act.
This legislation stopped the grant or assignment of certain new long residential leases of houses, to make it easier for tenants to acquire the freehold of a leasehold property, to ensure it is simpler to reduce rent payable under their leases to a ‘peppercorn’ or zero rate, and to extend the leases of their houses and flats.
Matthew Pennycook, the Minister of State for Housing and Planning, made a statement on the UK Government’s upcoming steps regarding leasehold and commonhold reform on 21 November 2024.
But Labour is willing to go further than the last Conservative government did on leasehold and commonhold reform by implementing a Leasehold and Commonhold Reform Bill.
This Bill intends to reinforce leaseholders’ rights to extend their lease, buy their freehold, and take over management of their building, as well as to modernise the commonhold tenure by reforming the legal framework.
Ground rents for current leaseholders will also be better regulated should the Bill become law, and the UK Government is currently consulting on the best way to reinforce the rights of freehold homeowners on private or mixed-tenure residential estates.
The threat of forfeiture to guarantee compliance with a lease agreement, or giving up something as a penalty for wrongdoing, will be removed.
Pennycook said he will look at bringing in qualifications for property agents, something Propertymark has long campaigned for. In most parts of the property sector throughout the UK, it is not mandatory for a property agent to have a qualification, which means there are many rogue agents out there who have no legal knowledge when it comes to selling houses. By bringing in qualifications, Propertymark believes this will help professionalise the housing industry.
Timothy Douglas, Head of Policy and Campaigns at Propertymark, comments: “Propertymark welcomes further reforms to leasehold to strengthen protections for consumers and make it easier for people to buy, sell and rent homes.
“It is encouraging that the Minister understands the value of qualifications for agents and professionalising the property sector. Propertymark looks forward to continuing to work with the UK Government to ensure these requirements are extended as widely as possible across the property sector.”
