The UK government has clarified its position on the future of leasehold tenure, with Housing Minister Matthew Pennycook rejecting calls for its immediate abolition. Speaking at the Institute for Government think tank, Pennycook emphasised the complexity of ending leasehold overnight and outlined the government’s commitment to making commonhold the default tenure instead.

Government stance on leasehold abolition

In a recent speech, Matthew Pennycook addressed the ongoing debate surrounding leasehold reform. He criticised calls for the outright and immediate abolition of leasehold, highlighting the practical and legal challenges involved. Pennycook explained that the government’s manifesto did not promise instant abolition, recognising that the leasehold system affects around five million leases across England and Wales.

He questioned how such a rapid change could be implemented lawfully and feasibly, pointing out the difficulties in managing the mortgage market impact, updating land registry records, and establishing millions of commonhold associations with the necessary governance structures. Pennycook described the idea of immediate abolition as a “glib soundbite” rather than a serious policy proposal.

Transitioning to commonhold as the default tenure

Instead of abolishing leasehold outright, the government aims to phase out the system by making commonhold the default form of tenure for new developments. Pennycook described commonhold as a “modern homeownership structure” used internationally and a significant improvement on leasehold.

He emphasised that commonhold places ownership and control of buildings and shared facilities directly in the hands of the residents, rather than third-party landlords. This model ensures that homeowners have a lasting stake in the management and upkeep of their properties.

Responses from the leasehold reform campaign and industry

The National Leasehold Campaign acknowledged the government’s position that leasehold cannot be abolished overnight but urged faster action to protect existing leaseholders. They expressed frustration over years of delays and consultations, stating that “justice delayed is justice denied.”

The campaign welcomed the minister’s honesty about the challenges and clarity on the government’s direction but stressed that intent must translate into tangible outcomes for leaseholders facing rising costs and insecurity. They called for the promised legislative measures to be delivered without further postponement.

Andrew Bulmer, CEO of The Property Institute, supported the government’s ambition to revitalise commonhold and reform leasehold. He highlighted the importance of mandatory qualifications for property managers to raise professional standards and improve trust among residents managing their own buildings. Bulmer encouraged the government to consider further regulation of property managers to support this transition and boost housing delivery.

Service charges and regulatory considerations

Pennycook also addressed concerns about service charges, acknowledging their potential negative impact on leaseholders. When questioned about the possibility of introducing caps or stronger regulatory oversight, he expressed reservations about such measures.

He explained that caps could hinder leaseholders who have taken control of their buildings and need to raise funds for necessary works, such as roof repairs. Instead, Pennycook advocated for reforms that improve transparency and provide leaseholders with effective means to challenge unreasonable charges, noting current barriers like litigation costs and lack of standardised information.

What this means for landlords

For landlords, the government’s approach signals a gradual shift away from leasehold towards commonhold, affecting new developments rather than existing leases in the short term. Landlords should prepare for evolving tenure structures that empower residents with greater control and responsibility over their properties.

The emphasis on mandatory qualifications and potential regulation of property managers also indicates rising professional standards within the sector. Landlords and agents may need to adapt to these changes by ensuring compliance and engaging with qualified managing agents to meet future expectations.

Meanwhile, the government’s reluctance to impose service charge caps suggests that landlords will continue to have some flexibility in managing costs, provided charges remain reasonable and transparent. However, increased scrutiny and the possibility of more accessible dispute resolution mechanisms may require landlords to maintain clear communication and fair practices with leaseholders.

Source: Based on reporting from Property118

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