For millions of people in the UK, homeownership – especially in a flat – has traditionally meant navigating the often complex and confusing world of leasehold. The current system, sometimes feeling archaic and stacked against the homeowner, is now facing a monumental shift as the government pushes to make commonhold the default tenure for flats.

This is a change that has left many leaseholders and freeholders scratching their heads. What is commonhold, how is it different, and what does the government’s current reform agenda, including the Leasehold and Freehold Reform Act 2024 (LFRA 2024), mean for you?

At Levels Property Management, our commitment to Integrity, Information, and Innovation is driving us to stay ahead of this legislative curve, ensuring our clients are not only compliant but fully informed and prepared for the future of property ownership.

A Background to Leasehold Reform

The UK’s property ownership system for multi-occupancy buildings has historically been dominated by leasehold, where a homeowner owns the right to occupy a property for a fixed period (the lease) but does not own the land or the building’s structure; a freeholder or landlord does.

The issues with leasehold are well-documented and have fuelled calls for reform for years:

• Depreciating Asset: As the lease term shortens, the property’s value decreases, requiring expensive lease extensions.
• Ground Rent: Leaseholders often face punitive and escalating ground rents.
• Lack of Control: Leaseholders have little say over the management, maintenance, and associated costs (service charges) of their building, which are controlled by the freeholder or the RMC / RTM.
• Forfeiture: The threat of forfeiture allows leaseholders to lose their home and equity for relatively minor breaches of the lease.

The Commonhold and Leasehold Reform Act 2002 first introduced commonhold, a type of ownership used successfully across the world, but it failed to take off in the UK due to various legal and practical flaws. Learning from this “false dawn,” the government is now determined to reinvigorate the model.

What is Commonhold and Why is it the Government’s Goal?

Commonhold is an alternative form of tenure for multi-occupancy developments like blocks of flats. It is based on a simple, powerful principle: the homeowners should own and control the building.

Key Features of Commonhold:

• Freehold Ownership of Unit: Each unit owner owns the freehold of their individual flat, ensuring perpetual ownership with no expiring term.
• Collective Ownership and Management: The common parts of the building, such as the roof, structure, entrance halls, and grounds, are owned and managed jointly by all unit owners through a non-profit company called a Commonhold Association (CA).
• No Ground Rent or Forfeiture: The concepts of ground rent and the threat of forfeiture are eliminated.
• Democratic Control: Unit owners become members of the Commonhold Association and have a say in decision-making, including approving the annual budget and setting the building’s ‘rulebook,’ known as the Commonhold Community Statement (CCS). The CA can hire and fire the managing agent, making the agent accountable to the homeowners.

The government’s goal is to make commonhold the default tenure for all new flats and to simplify the process for existing leaseholders to convert to commonhold.

The Current Status of Reform: Where Are We Now?

For confused leaseholders, the key takeaway is that the government is tackling reform in two main phases: one to fix the current leasehold system, and one to introduce commonhold.

Phase 1: The Leasehold and Freehold Reform Act 2024 (LFRA 2024)

This Act is now passed and is the key piece of legislation addressing existing issues. However, the changes are not effective immediately; they will be brought into force in stages via secondary legislation.

Feature	Status	Impact for Leaseholders
Lease Extension Term	Passed	Extension to 990 years with no ground rent for all new claims. This provides maximum security for homeowners.
Ground Rent Reduction	Passed	Future ground rent is zero on newly extended leases.
Simplifying Enfranchisement	Passed	Makes it easier and cheaper for leaseholders to collectively buy their freehold or take over management (Right to Manage).
Service Charge Transparency	Passed	Requires standardised service charge formats and easier access to key information, making accounts clearer and more digestible.
Banning Forfeiture	Passed	Removal of the right of forfeiture for minor breaches.

What This Means Right Now: The LFRA 2024 has officially become law, but the practical provisions will be rolled out over the next 12-18 months. Currently, the existing legal processes for lease extensions and enfranchisement are still in place, but leaseholders can anticipate the new, favourable terms becoming available relatively soon.

Phase 2: The Future Commonhold Legislation

This crucial legislation, often referred to as the Second Leasehold and Commonhold Reform Bill, is still to come.

Feature	Status	Impact for Homeowners
Default Commonhold Tenure	Proposed Legislation	This Bill will set out the legal framework to make Commonhold the default tenure for all new-build flats.
Conversion Mechanism	Proposed Legislation	This will introduce a simplified, practical, and affordable legal process for existing leaseholders to transition from leasehold to commonhold.

Important Note on Timeline: It is vital to stress that Commonhold is still future legislation and may take some time to be implemented, particularly the mechanism for converting existing leaseholds. The full details of what this legislation will look like are not yet known, and they will be subject to ongoing debate and parliamentary scrutiny before they come into effect.

The Crucial Role of Collective Responsibility Under Commonhold

While commonhold is championed for giving homeowners control, it is essential to understand that this control comes with significant collective responsibility. Should you consider purchasing a property in a shared building under a commonhold system, working together is not optional, it is absolutely essential for the development’s smooth running and financial stability.

The Commonhold Association is run by the unit owners, meaning they are collectively responsible for the key functions traditionally held by a freeholder. This is a real consideration when purchasing.

Key Responsibilities of a Commonhold Association (and its Members):

• Financial Management: Collectively approving budgets and ensuring service charge contributions (known as “commonhold contributions”) are paid on time to cover costs.
• Building Maintenance: Making joint decisions on routine maintenance, major works, and repairs to the structure and common areas.
• Compliance: Ensuring the entire building remains compliant with all UK health, safety, and fire safety legislation (which includes dealing with statutory fire safety).
• Effective Governance: Voting, attending meetings, and ensuring the Commonhold Association has the necessary leadership to hire, manage, and hold a professional property manager to account.

This democratic system relies on all property owners working together for the common good of the building.

Levels: The Essential Role of Professional Management

The shift to commonhold empowers residents but simultaneously places the burden of complex, professional building management directly onto the Commonhold Association. This is where the crucial role of experienced managing agents, like Levels, becomes even more indispensable.

We understand that residents, while motivated, are not always property management experts. Our role is to provide the professional knowledge, resources, and support that CAs will need to succeed:

• Safety and Compliance Expertise: Managing agents provide the essential knowledge for statutory fire safety and overall building safety compliance. This is complex and critical risk management that volunteer-led CAs cannot afford to get wrong.
• Professional Support and Guidance: We provide dedicated Property Managers who are members of The Property Institute (TPI) and participate in continued professional development, ensuring they are always equipped to deal with legal, accounting, and maintenance issues. We also offer an in-house legal team experienced in tribunals and complex matters.
• Integrity and Financial Transparency: Our core value of Integrity ensures the CA’s finances are managed with complete transparency, with no uplifts on contractor invoices. We run dedicated client bank accounts, providing peace of mind to all unit owners.
• Technology and Efficiency: Our Innovation – the 24/7 customer portal – is the tool that makes resident-led management functional. It provides CAs with real-time financial reporting, streamlines repairs and maintenance requests, and ensures all owners receive consistent communication.

The commonhold revolution is about community, control, and transparency. Clients of Levels Property Management can rest assured that we are not just reacting to legislation; we are already embodying the ‘next level’ of management that the future of UK property ownership demands – providing the expert support necessary for homeowners to confidently manage their own building.

If you are a leaseholder confused by the reform, or a freeholder preparing for the future, contact us today. We are here to guide you through this momentous change.

Want to learn more about the Leasehold and Freehold Reform Act 2024 (LFRA 2024) and the recent ruling? Click the button below.