In its recent White Paper released on 3 March 2025, the government confirmed its commitment to ensuring "that commonhold becomes the default tenure". This is in preference to the "feudal leasehold system" which has been around for hundreds of years, and which the government is (currently) trying to reform, but in due course, vows to bring to an end. 

Whilst this approach might be a headline-grabber and may seem like good news for leaseholders, we explore whether commonhold is really going to be the "simple" model that homeowners have always hoped for. 

What is commonhold?

On paper it is simple: people living in units within a building / estate own and exercise control over the management, shared facilities and related costs of those buildings / estates, through membership of a Commonhold Association. A "Commonhold Community Statement" (CCS) defines the rights, responsibilities and rules for all unit holders within a commonhold and is essentially the governing framework for the commonhold association. 

The advantage is that it transfers all decision-making and powers to homeowners so that they have a greater say over how their homes are managed and flexibility to meet the changing needs of the buildings / estates and the residents within them. In addition, instead of the value depreciating over time (as is inevitable when lease terms decrease and/or ground rents increase) the residents' interests are preserved in perpetuity. 

Commonhold - already a failed tenure?

From a statutory point of view, commonhold has actually been on the books since 2002. However, it has failed to take off for a number of reasons, including the complexity of the procedures to establish commonhold, and lenders not being willing to provide security over properties owned on a commonhold basis.

The Law Commission's July 2020 report: "Reinvigorating commonhold: the alternative to leasehold ownership" (commissioned by the previous Conservative government) referred to commonhold as a preferred form of ownership and made various recommendations to make the current process simpler, more flexible and cost-effective for leaseholders, and more attractive for developers and lenders. These recommendations have significantly informed the current government's commonhold White Paper which ultimately seeks to illustrate how commonhold should not be touted as a failure, but instead provide consumers and industry professionals with a greater understanding of how: 

• Commonhold will operate in the future; 
• The current model might be updated to account for the known issues; and 
• Those changes will benefit consumers and industry members.

How will the government transition to commonhold? 

The government's intention to "reinvigorate commonhold" will take the form of a comprehensive new legal framework, a draft of which will be published later this year, followed by the Leasehold and Commonhold Reform Bill in due course.

This will be backed up by a ban on the sale of new leasehold flats (a necessary step to ensure the government's commitment to commonhold becoming the default tenure), with a consultation on how best to approach this being launched during the course of the year.

What are the proposed reforms?

Enabling commonhold to work for all types of development 

To enable commonhold to work for larger developments, the government will introduce new flexibilities allowing commonhold to include separate sections of a building / estate and separate heads of costs so only those with access to those sections / services have a say in their management. Developers will be given more flexible rights around how to build and sell a commonhold, with commonhold being opened up to a wider variety of consumers by permitting certain arrangements (which are currently prohibited) such as shared ownership and home purchase plans.

Increasing flexibility and safeguard for unit owners

To promote democratic decision making within a commonhold and create greater satisfaction and safeguards for commonhold owners, the government proposes to:

• Increase the threshold for changing a local rule (the parts of a CCS relating to a specific development) from 50% to 75%;
• Prohibit "event fees" (for example on resale or subletting) except where a commonhold is a dedicated retirement development; 
• Set a clear process for appointing directors, including what to do if no-one comes forward to volunteer;
• Make public liability insurance compulsory for commonhold developments;
• Require commonhold associations to set up and maintain a reserve fund to mitigate large or surprise costs; and
• Put unit owner participation, cost transparency and fairness at the forefront of making budgeting and financial decisions. 

Fixing things when they go wrong

To alleviate the issues when faced with emergencies (for example where funds are required quickly) and/or disputes, the government will introduce the following measures:

• The ability for commonhold associations to obtain a loan secured against either the common parts or future commonhold contributions, with the ability to sell parts of the buildings / estate as a last resort;
• Promotion of mediation and out of court processes being used to resolve disagreements, with cases going through the court system being handled by the Tribunal; 
• Enhanced powers to commonhold associations to recover debt when unit holders do not pay their share, for example the ability to apply to court for an expedited order to sell a unit (subject to safeguards to protect unit owners); 
• Improvement of the process for winding up a commonhold; and 
• Allowing unit owners in the minority on a vote to challenge certain important decisions at the Tribunal.

What issues remain outstanding?

The White Paper outlines a number of factors on which the government is still seeking resolution including: 

• An easier way to convert existing leaseholds to commonhold - this would entail putting in place some or all of the Law Commission's 17 recommendations in this regard; 
• Disapplication of some commonhold requirements considered too onerous for "micro-commonholds" (those made up of only 2 or 3 units with only a few shared parts); and
• Banning the sale of new leasehold flats - the government will not put this into place until it is confident that commonhold, in its revised form, is a viable alternative.

Comment 

Whilst the shift from leasehold to default commonhold seems like a daunting prospect for most stakeholders, the White Paper does appreciate that the project is a massive one, and the model will evolve through consultation and consumer / industry input. 

For commonhold to take off at scale the government accepts that it needs to instill confidence in consumers (to buy), developers (to invest) and lenders (to lend), and it believes the new framework will achieve that. However, whilst the clear intention is there, and there are undoubtedly some potential benefits for each of these groups, there is still a lack of clarity around how and when these reforms will be implemented, both in statute and practically. 

The next step will be the publishing of the draft bill in the second half of 2025, which will hopefully go some way to providing this clarity. It will be interesting to see whether the reforms will be implemented through changes to the existing regime (for which, as mentioned, there has been a complete lack of uptake). If so, this may very well add to the complexities of the existing system and consequently be a deterrent to commonhold, rather than an incentive. 

In addition, with no clarity on the mechanisms for converting leasehold to commonhold, and suggestions of non-consenting leaseholders retaining their leasehold interests, it seems likely that we will be living with a mixed commonhold / leasehold system for many years to come….and how the Tribunal will deal with these conflicting systems will be another interesting conundrum to contend with.