Leaseholds in England and Wales could soon be consigned to history, as the Government announces plans to outlaw new leasehold properties and promote a system of shared ownership known as commonhold. This ban on leaseholds is being described as the beginning of the end for a “feudal” system that has long burdened homeowners with rising costs and limited control over their properties.

But what does this actually mean for those already living under leasehold agreements? And will this fix the problems of unfair charges and uncertainty that leaseholders have faced for years? Let’s break it down.

Why the Ban on Leasholds?

For years, leasehold ownership has been criticised as an outdated and unfair system. If you own a leasehold property, you technically don’t own the building – just the right to live there for a set period, often decades or even centuries. However, the real power remains with the freeholder (the landlord), who can charge ground rent, service fees, and other costs while leaseholders have little say in how their buildings are managed.

Things came to a head when ground rents began rising sharply, with some leaseholders facing huge annual costs. According to estate agent Hamptons, ground rents shot up by an average of 11% between 2023 and 2024, reaching an average of £2,300 a year. This created financial stress for many homeowners, especially in newly built developments where leases often come with restrictive clauses and expensive charges.

What Will Change Under the New Law?

Under the Government’s proposed reforms, leaseholds on new properties will be banned. Instead, new flats will be sold under commonhold – a system that allows homeowners to collectively own their buildings and have a direct say in management decisions. Commonhold is already widely used in countries like Australia, the US, and much of Europe, but the UK has lagged behind in adopting it.

Alongside banning new leaseholds, the proposed reforms include:

• Making commonhold the default for new flats – giving residents control over their buildings.
• More flexibility over development rights – allowing homeowners to make collective decisions.
• Public liability insurance for commonhold buildings – giving mortgage lenders confidence in the system.
• A clear legal framework for managing commonhold properties – reducing disputes.
• Stronger rights for homeowners in commonholds – including democratic decision-making and control over communal budgets.

These changes will apply to England and Wales, where around five million leasehold properties exist, with about 70% being flats.

What About Existing Leaseholders?

While the new law will prevent future leasehold sales, it does not yet offer a straightforward way for existing leaseholders to convert to commonhold. That means millions of people are still stuck with lease agreements, some of which include costly fees and restrictions.

Changing from leasehold to commonhold isn’t simple – freeholders would likely demand compensation, and there is no legal framework in place yet to force the transition. The Government has promised to review options for existing leaseholders, but for now, they remain in limbo.

Will This Finally Fix the System?

A ban on leaseholds for new properties is a major step, but without a clear plan for existing homeowners, some of the biggest issues remain unresolved. People already living under leasehold agreements will still have to deal with service charges, permission fees, and ground rents unless further reforms come into play.

For those buying new flats in the future, however, the end of leaseholds could mean lower long-term costs and more control over their homes. While commonhold isn’t a perfect system, it gives homeowners a stronger voice and removes the financial burdens that have made leaseholds so controversial.

For now, all eyes are on the Government to see whether it will go further and address the millions still trapped in the leasehold system.