This website is for intermediary use only. If you’re not an intermediary, please go to our customer site here.
What is happening with leaseholds?
Leasehold ownership has become an increasingly contentious issue in recent years, driven by government reforms and ongoing debates around fairness for homeowners. Proposed legislative changes look to address longstanding concerns about escalating ground rents and restrictive lease terms. But as these developments unfold, brokers and property professionals need clarity on how leasehold reforms will reshape the housing market, including buy-to-let investment.
We look at the latest updates and their potential implications for investors, as well as what brokers need to know about leasehold reform.
Major reforms underway
The government is overhauling the leasehold system as it aims to address longstanding issues faced by homeowners. The Leasehold and Freehold Reform Act 2024 received Royal Assent in May 2024. One of the few provisions already in force is the removal of the two-year ownership requirement, which allows leaseholders to extend their lease or buy the freehold immediately after purchase.
Other key reforms, including a 990-year lease extension term and ground rent reduced to a peppercorn (effectively zero), are part of the Act but have not yet come into effect and will require secondary legislation.
Transparency is a key focus of the reforms. Leaseholders will gain greater insight into service charges and building insurance fees, with new rights to request detailed information and challenge unreasonable costs.
The Act proposes removing the presumption that leaseholders must pay the landlord’s legal costs when disputing charges. But this has not yet come into force and may be subject to change depending on the outcome of the judicial review.
Transition to commonhold
In March 2025, the government published a Commonhold White Paper, outlining its plan to make commonhold the default tenure for new flats and phase out leasehold for all newly built flats. A draft Leasehold and Commonhold Reform Bill is expected before the end of 2025.
Under commonhold, homeowners will own their individual units and collectively manage common areas. The goal is to eliminate the traditional landlord-tenant dynamic from a leaseholder point of view, with the model providing greater control for homeowners over their properties and associated costs.
Consultation is ongoing around lowering the consent threshold for converting to commonhold from 100% to 50%, though this remains legally and practically complex. This is especially true for mixed-use buildings or multi-block developments.
These steps are designed to simplify the process and encourage wider adoption of commonhold arrangements.
While the reforms represent a significant shift in property ownership structures, their full implementation will require time and further legislative action. Brokers and property professionals can benefit from staying up to date on these developments, as it is likely to have an impact on buy-to-let investors looking at leasehold properties.
What comes next for leasehold reform?
While the Leasehold and Freehold Reform Act 2024 has laid the groundwork, most reforms are unlikely to take effect until secondary legislation is enacted. Many timelines also remain unclear due to ongoing consultations and legal challenges expected to run into late 2025.
These include measures to enhance transparency in service charges, regulate building insurance commissions and facilitate the transition to commonhold ownership.
Challenges remain, however. A judicial review, expected in late 2025, will address concerns raised by freeholders, including challenges to the removal of marriage value and the proposed ground rent cap.
Moreover, the practicalities of converting existing leasehold properties to commonhold, especially in mixed-use developments, require careful consideration. These legal challenges could delay or alter the final shape of the reforms, particularly for lease extension valuations and ground rent provisions.
As the reforms progress, stakeholders across the property sector need to stay informed and engaged to navigate the changes effectively.
What it means for landlords with leasehold properties
The Leasehold and Freehold Reform Act 2024 brings significant changes for landlords holding leasehold properties. Key reforms include the abolition of the two-year ownership requirement for lease extensions, allowing leaseholders to extend their leases immediately upon acquiring the property. Again, the standard lease extension term has been increased to 990 years with ground rent reduced to zero, potentially impacting the long-term revenue streams for landlords.
The Act proposes removing the obligation for leaseholders to pay the landlord’s legal costs when challenging service charges. This provision is not yet in force and may be subject to revision following the outcome of the judicial review.
The proposed transition to commonhold ownership for new flats also signals a shift away from traditional leasehold arrangements, potentially affecting future investment strategies for landlords.
Stay ahead with Molo
Leasehold reforms are reshaping the property landscape. At Molo, we help brokers and landlord clients navigate these changes with clarity and confidence.
Stay up to date with all the latest buy-to-let developments or contact us to learn more.
New business & general enquiries
Got a question before you get started? Get in touch with our Intermediary Customer Support team.
