King’s Speech: Labour to phase out leasehold system

Labour will ban the sale of leasehold flats and attempt to replace the system with commonhold, King Charles said earlier today.

The government will implement and extend Michael Gove’s modest Leasehold and Freehold Reform Act 2024, which was the last bill to be passed by under Rishi Sunak’s government.

Gove walked back any significant reforms to the leasehold system in the bill, such as caps to ground rents, after pressure from pension funds and investors.

Labour have previously pledged to take decisive action on the leasehold system, which includes changing costly ground rents and lease extensions. Earlier this year, the party dropped its promise to abolish leasehold within 100 days of parliament.

What will Labour do?

The government will implement the Leasehold and Freehold Reform Act, as well as extending it with recommendations from the Law Commission on the leasehold system, it said.

This includes tackling “unregulated and unaffordable” ground rents, and removing the “disproportionate and draconian” threat of repossession as a way to ensure payment.

Labour will introduce a new legal framework to “reinvigorate” commonhold, as well as banning the sale of new leasehold flats to make commonhold the default tenure.

It plans to bring the leasehold system to an end, but has not given any time frame for this goal.

Leasehold vs Commonhold

Leasehold allows the homeowner to own the property only for the length of time set out in the lease. It has been described as “feudal” by housing campaigners as it forces the leaseholder to pay expensive ground rents and service charges to freeholders, who own the building or land on which the property is built.

There are around five million leaseholds in England and Wales, with 3.4 million of those in cities. 

The costs associated with leasehold have soared in recent years, with Labour estimating that the average ground rent is now around £300 per year in England.

Commonhold was introduced as an alternative to leaseholds. It allows buyers to share ownership of a multi-occupancy building, with households splitting equal responsibility for common areas and services.

There are fewer than 20 commonhold blocks across England and Wales.