Editor's note: This brief was summarised by The Property AI Newsroom from a report by Property Industry Eye. Read the original article for full details.

Gradual Commonhold Reform Seen as Crucial for Housing Supply

The government has published its Draft Commonhold and Leasehold Reform Bill, aiming to abolish leasehold for new properties and replace it with commonhold. However, concerns have been raised about the readiness of the commonhold system and its acceptance among developers, which could impact the delivery of new homes.

In January, the government took the first step towards fulfilling its manifesto promise to abolish leasehold by publishing the Draft Commonhold and Leasehold Reform Bill. The government has stated its intention for all new properties to be sold as commonhold, a significant shift from the traditional leasehold model. Despite opposition from other parties, the government’s substantial majority is expected to help push this change through during the current Parliament.

At the same time, the government has committed to a target of building 1.5 million homes within the same period. Achieving this target is described as an “almighty challenge,” with current housebuilding levels at a record low. Meeting the target will require higher-density housing, particularly in urban areas where flats are often the only viable option due to land constraints.

The success of new developments, many of which would be commonhold units, will depend partly on developers’ attitudes towards the new tenure. Currently, commonhold is largely untested at scale in England and Wales, with fewer than 25 developments nationally. Developers, investors, and mortgage lenders have expressed concerns about the risks associated with an unfamiliar system.

Commonhold has been available since 2004, but uptake has been limited due to technical issues, including dispute resolution, amending constitutional documents, and managing the transition as developments are completed. Developers are more familiar with leasehold, which is deeply rooted in property law and standard funding models.

Questions remain about how development finance will work without a freehold reversion, how developers will recoup upfront costs, and how covenants will be enforced in mixed-use buildings. The government acknowledges that the current version of commonhold requires significant work to address these technical hurdles.

For letting agents and inventory clerks, the transition from leasehold to commonhold could mean changes in property management practices and legal frameworks. The government’s approach suggests that reform will need to be gradual to avoid disrupting housing supply and to ensure the new system is workable for all parties involved.