The Commonhold White Paper

Tesla’s Slumping Sales: What Happened?

May 23, 2025

Published by Shwetha Sivaraman at May 29, 2025

Article by Cristiana Eftenoiu

The Government’s Commonhold White Paper, published in March 2025, sets out plans to reinvigorate the commonhold system with the intention of making it the default tenure as opposed to leaseholds. With leaseholds making up 4.98 million homes in England, the Government’s commonhold reforms represent the most significant shake-up to homeownership for two decades. This article looks at what commonholds entail, the proposed reforms, and their business implications.

What are commonholds?

Commonholds are ownership forms where individuals own their flats as freeholds. Unlike leaseholds, which have a set period ranging from 99 to 999 years, meaning owners only purchase their right to occupy a property for a certain period of time, commonholds do not have an expiration term. Under a commonhold, no landlord owns the freehold to a property and owners of individual units share ownership of communal areas such as gardens, lifts, and stairs under a ‘commonhold association’. This commonhold association is a company limited by guarantee. The legal rights of all the owners in common, which are part of the association, are set out in the Commonhold Community Statement. This legal document outlines all the owners’ rights and responsibilities, detailing how the shared areas will be managed, funded and maintained.

Recently, leaseholds have come under increased scrutiny given the lack of ownership granted to flat owners under this tenure, the high ground rents and arbitrary service charges that must be paid to third-party administrators. The Government’s plans to ban leaseholds on new flats come after the recent Leasehold and Freehold Reform Act 2024, which was enacted to provide greater protections to leaseholders. Therefore, this White Paper can be seen as a further push to help give homeowners greater rights and powers. As described in the White Paper, the commonhold model is underpinned by the idea that those who own flats should also be able to own and manage their buildings, having a say in their upkeep and decision-making. This is supposed to be a more democratic model of ownership compared to the perceived unfairness of the leasehold model.

Many countries across the world are subject to commonhold ownership structures, including Germany, France and Canada.

What are the proposed reforms?

Although commonholds are not new and were first introduced in England and Wales in 2004 through the Commonhold and Leasehold Reform Act 2002, they have failed to materialise due to a number of challenges. The main flaws attributed to the 2002 Act were its rigidity and lack of consideration for different ownership structures, such as shared ownership and mixed-use sites. Since this offered less flexibility than leaseholds, it failed to become the default. Furthermore, commonholds failed to generate the income streams that leaseholds could through ground rents and administration fees, thus disincentivising developers and landlords from switching to a commonhold model. The White Paper aims to address these challenges by drawing on the Law Commission’s 121 recommendations aimed at new commonholds and leasehold conversions to commonholds.

Some key changes proposed in the White Paper include introducing separate sections and separate heads of costs. This means that only owners of certain units with access to specific services or parts of buildings will have a say in their management and share the upkeep costs. For example, suppose a developer is building a property intended for flat occupancy and ground-floor shops which may have a car park. In that case, the ownership structure will be split between those owners of the flat units and those of the commercial property. This is intended to offer more flexibility and allow a larger range of developments, including mixed-use developments, to fall under commonhold tenure. Hence, these changes are meant to make commonholds more attractive for developers, lenders and consumers.

What does this mean for business?

Real estate developers and investors have had to adapt to lots of changes over the past year, which casts doubt on whether the new commonhold framework will be welcome. As a group of freeholders has secured a judicial review of the existing Leasehold and Freehold Reform Act 2024, which they view unfavourably, it is uncertain whether this new Bill will be well received by investors. The threat to freeholders’ income streams posed by abolishing ground rents and further plans to abolish leaseholds is likely to materialise in weakened investor appetite, potentially harming the Government’s plans to build 1.5 million homes during their term. Therefore, these changes could pose a potential disruption to housing supply.

Furthermore, lenders may also be unwilling to grant loans for commonholds, given their risk aversion. However, the Government acknowledged this in the Paper by assuring that commonholds tend to be more secure due to the inability of forfeiture and the absence of depreciating value present with leaseholds. Whether or not this guarantee will provide lenders with increased confidence to lend is yet to be seen.

One sector that benefits from these reforms is the legal sector. Knowledge lawyers and real estate solicitors will likely welcome the increase in work, given that their clients will rush to find out how these changes impact their ongoing and future developments.

A draft bill is set to be published in the second half of 2025, which will shed further light on the issues.