What does the Commonhold White Paper tell us about the future of home ownership?

On 3 March 2025, the Government published its much anticipated Commonhold White Paper which sheds light on its plans to reinvigorate commonhold and to ensure it becomes the default tenure of property ownership by the end of this Parliament.

The Government’s White Paper declares that commonhold is a “radical improvement” on leasehold ownership, particularly for modern home ownership. The basic principle driving this change is that the people who live in flats are most affected by decisions relating to the costs, management and upkeep of their buildings, and they should be responsible for making these decisions, instead of third party landlords. This comes as a response to growing complaints over leasehold ownership resulting in ever-increasing ground rents and poor services provided by freeholder management companies, who have no direct stake in the day-to-day running of the building.

What is commonhold and why does the Government propose to ban new long-term leaseholds?

Commonhold was a form of tenure first introduced in 2004 by the Commonhold and Leasehold Reform Act 2002. Unlike leasehold, commonhold is a type of freehold title in which each flat (which is known as a unit and its owner as a unit-holder) is owned outright, and the communal areas in a block such as the stairs, lifts, gardens or roof, are owned by a commonhold association. The commonhold association is a company limited by guarantee and by virtue of owning a unit, each of the unit-holders has a share in the company which provides them with an equal right to participate in the running and management of the communal areas of the building.

Unlike leasehold title which reduces in value as the term runs out, commonhold properties retain their value. Furthermore, the structure of commonhold differs from leasehold in its documentation. Commonhold relies on a set of standardised key documents, most notably the commonhold community statement  which governs the rights and responsibilities of unit-holders. The government intends to simplify matters further by making it largely prescriptive, which will allow each unit to be governed by the same basic rules, thereby making it easier to manage.

There are less than 20 commonhold developments to date across the country. The main reason for the resistance by developers, leaseholders and lenders is that in its current form, commonhold has a number of flaws. For developers, there have been no incentives to move away from leaseholds as they currently provide developers with a source of future income through the ability to sell the freehold they retain, or by selling lease extensions to leaseholders. Lenders are often reluctant to provide mortgages to buyers of commonholds, particularly because of a perceived risk that the commonhold association is more likely to go into insolvency than a large well-established development company. The lack of lender support has had a knock on effect on the willingness of developers to produce commonhold properties. Finally, for leaseholders, even if they want to convert to commonhold, the unanimous consent of everyone with an interest in the property is required, which is often an insurmountable hurdle.

Key proposals in the Commonhold White Paper

The Government acknowledges the current flaws of commonhold ownership and proposes  extensive changes, encompassing all areas of the existing legislation. Key changes include:

• Making commonhold the default tenure and a ban on new leasehold flats
• The introduction of ‘sections’, which will allow distinctive areas of a commonhold building to be managed separately from other communal areas. This means the commonhold association can require only those unit-holders who benefit from a specific communal area to contribute towards the cost of maintaining that area and vote on how it should be managed. Sections will benefit developers as well as unit-holders; providing them with flexibility in managing multi-use commercial buildings through a commonhold structure
• A required level of reserve funds held in statutory trust to ensure the commonhold association can meet any large or unexpected costs of repair or maintenance
• The ability for commonhold associations to take out loans using the building or future payments from unit-holders as security
• Thresholds for costs so that any expenditure above the threshold can be challenged by unit-holders to ensure that costs remain manageable and reasonable
• Stronger remedies for commonhold associations in relation to unpaid debts by unit-holders, including applications to the Court for an expedited order to sell a unit. This will include pre-conditions and protection for lenders to allow them some control over the process
• A more comprehensive set of rules governing the winding-up of commonhold associations, the removal of directors of the commonhold association, and more streamlined dispute resolution processes to safeguard the interests of parties involved in the building, including lenders and unit-holders.

Conversion of existing leaseholds

As part of the Government’s plan to eradicate long-term leaseholds, it also proposes to make it easier for leaseholds to be converted into commonhold properties by reducing the threshold for unanimous consent to 50%. Although understandably, the White Paper acknowledges that there are issues around the position of non-consenting leaseholders (i.e. those who don’t want to or cannot afford to convert to commonhold). The Government has suggested that they will be allowed to continue as leaseholders with a view to gradually phasing them out over time, however, whether a group consisting of unit-holders and non-consenting leaseholders could work together effectively to ensure the continued management of the building remains to be seen.

Final thoughts

Ultimately, the Government’s White Paper has raised as many questions as it has answers regarding how the new mandatory commonhold proposal will work. Many of the details will need to be fleshed out further in the coming months, hopefully in the draft Leasehold and Commonhold Reform Bill which it intends to publish in the second-half of this year rather than in subsequent secondary legislation after the Bill has been enacted. However, what is clear is that the Government seems intent on reinvigorating commonhold. The Government states it is committed to working with developers, lenders and property professionals to shape the future of property ownership in England. We hope that it listens to the constructive feedback it will inevitably receive. In the meantime, if you have any questions about the topics raised in this article, please get in touch.