Leasehold Reform: What It Means for Landlords and the Lettings Market in South London

There is so much going on in the world right now, it’s a challenge to decide what to write about next!

Oval Office blow-outs, international trade wars, continued conflict in the middle east… geopolitical events do have a trickledown effect that can be worth exploring, in terms of their impact on our local property market…

Nevertheless, amid global headlines, domestic news often gets overlooked. Last week, the government announced a major Leasehold Reform, which many South London Landlords may have missed.

What Has the Government Announced?

Leasehold property ownership has been a controversial topic in England and Wales, especially in recent years, as stories have emerged of escalating ground rents, expensive lease extensions, and homeowners facing challenges under the leasehold system.

However, a landmark government announcement promises to abolish leasehold for new properties, bringing in a commonhold system, and has also pledged to make it easier for existing leaseholders to extend their leases or purchase freeholds (see here).

The news of this announcement by the government did receive a bit of airtime, but it felt fairly low on the agenda and seemingly it has slipped off the newsreel already – but as these things go, the changes proposed will have a real impact on our local housing market.

Let’s take a look at what the new leasehold proposals are, what would change, and what effect this will have on property here in South London.

The key elements of the reform include:

• A Ban on New Leasehold Properties – Developers will no longer be allowed to sell new-build flats or houses under leasehold terms. Commonhold will become the new standard (see below).
• Simplification of Lease Extensions – Existing leaseholders will benefit from a streamlined process to extend leases or buy their freehold, reducing excessive legal and administrative costs.
• Capped Service Charges & Ground Rents – Ground rents and service charges will be limited, legally, to protect leaseholders from unfair costs.
• Easier Transition to Commonhold – A legal framework will be developed to make it easier for existing leaseholders to convert to commonhold ownership.

This proposed reform follows on from the Leasehold and Freehold Reform Act 2024, which was a first step towards tackling some of these issues within the leasehold system. We do see the announcement this week as a sign that the government is willing to take bolder action to end leasehold ownership for good.

What Is Commonhold, and How Does It Work?

Commonhold is an alternative to leasehold that gives full ownership of a property, while shared areas (like hallways, gardens, and lobbies in flats) are jointly managed by homeowners through a commonhold association. It is not dissimilar to the ‘Share of Freehold’ set-up that we do often see, although there are some differences in the notional lease which tends to remain in place in a Share of Freehold.

Unlike leasehold, commonhold means:

✅ No Ground Rent – Homeowners won’t have to pay escalating ground rent fees.
✅ No Lease Expiry – Owners won’t have to worry about a 99-year or 125-year lease running out.
✅ Collective Control – Homeowners have a say in property management decisions, rather than being at the mercy of a freeholder.

This system has been successfully used in many countries, including the U.S. (condominiums), Australia (strata titles), and parts of Europe. The UK, however, has lagged behind – until now.

How Will This Impact Those Who Already Own Leasehold Properties?

If you did catch the news this week, the focus has definitely been on new properties, which has led to existing leaseholders, quite understandably, asking: "What about us?".

The good news for existing leaseholders is that the government has outlined key changes that could affect millions of current leasehold homeowners:

🔹 1. Easier Lease Extensions & Freehold Purchases

Under the new reforms:

• Leaseholders will be able to extend their lease to 990 years (currently, lease extensions are typically 90 or 50 years).
• The cost of extending a lease will be reduced, making it more affordable.
• Leaseholders will find it easier to buy their freehold, reducing their dependence on freeholders.

This is a major win for leaseholders who currently face high costs and legal barriers when trying to extend their lease or take control of their property.

🔹 2. The Shift to Commonhold

For existing leaseholders, transitioning to commonhold is an option—but not a requirement. The government will provide:

• Legal support for leaseholders wishing to convert to commonhold.
• Guidance on managing shared spaces under a commonhold association.
• Financial incentives to encourage conversions.

However, converting to commonhold will require collective agreement from leaseholders within a building, meaning the transition may take time. In the meantime, the easing of the process when it comes to lease extension should be a bonus to many.

🔹 3. Service Charges & Management Fees

Leaseholders often complain about excessive service charges and unfair fees. The reforms will:

• Set caps on service charges to prevent exploitation.
• Introduce mandatory transparency rules for property management companies.
• Give leaseholders stronger legal rights to challenge unfair charges.

This should provide greater financial security and fairness for those who own leasehold properties – indeed, as many landlords do. Of course, if a major refurbishment is needed, there is no avoiding the fact that the money to carry out the work has to be found somewhere. But that is the same if a property is freehold – if unavoidable work is required on a freehold property, the freeholder has to find the money… it is ‘unavoidable’.

So to an extent, there is just a bit more of a mind-shift that leaseholders may have to go through.

The Impact on Landlords and Investors

With leasehold set to be phased out, the property market will experience some significant changes:

🔹 Impact on Investor Buyers

✅ More Control & Security – Future buyers will benefit from commonhold properties, meaning no lease expiration, ground rent, or service charge disputes.
✅ Increased Confidence – The reforms could boost buyer demand, as people are more willing to invest in properties without hidden leasehold costs.

🔹 Impact on Landlords considering a Sale

🤔 Short-Term Uncertainty – While leasehold reform is good news for property owners, those currently selling leasehold flats may face buyer hesitation until the changes take full effect.
📈 Long-Term Stability – The market should stabilize as clearer rules on commonhold emerge, improving buyer confidence.

🔹 Impact on Property Developers

🏗️ New Developments Will Be Commonhold-Based – Property developers will need to adapt their business models to build commonhold apartments instead of leasehold ones.

Overall, these changes signal a major shift in UK property ownership, creating greater stability and fairness for future buyers.

Potential Challenges & Concerns

While the reforms are widely welcomed, some challenges remain:

⚠️ Transitioning Existing Leaseholds – Converting current leasehold properties to commonhold is a complex process that will take time.
⚠️ Legal & Administrative Delays – Implementing these reforms will require significant legal restructuring across the property sector.
⚠️ Developer Pushback – Some property developers have opposed the changes, arguing it could impact their profits.

Despite these hurdles, the government is pushing ahead with reforms which they see as being aimed at creating a fairer housing system. And for our part here at Bartlett and Partners, for once I think we would say, we tend to agree with the government here. It will be fairer.

What is the implication for our local lettings market in South London?

There is not a huge amount of potential sites for brand new, new-build development here in South London; we are a relatively densely built part of the world, and likely plots have been snapped up and developed long since, although of course some isolated pockets remain.

There is some scope for brownfield development of commercial buildings to residential, though, and these by their nature tend to lend themselves to becoming flats – which means for now there could be a pause in any such development whilst the developers themselves ‘wait and see’.

If this reform takes effect, which is likely, given the precursor ‘Leasehold and Freehold Reform Act’ already received Royal Assent – then commonhold flats will offer landlords a safer, more appealing ownership model.

As for those landlords who already own leasehold properties? Obviously the ability to more easily extend troublesome leases, feel protection from unreasonably hiked leasehold charges, and potentially – with the agreement of other leaseholders – the ability to convert to commonhold… well, all of that is a benefit, naturally.

And as it goes, according to data from the Department for Levelling Up, Housing and Communities, around 36% of properties in London are leasehold, and London in particular suffers from many of its leasehold properties suffering short leases – so this reform really could be something that will significantly benefit leasehold property owners in our part of the world.

 

Final Thoughts: A Landmark Shift for UK Property

The abolition of leasehold marks one of the most significant property reforms in decades. For future landlords or even for existing landlords looking to grow their portfolios, it represents a move toward full property ownership with no hidden costs or restrictions. It promises fairer lease extensions, lower fees, and a pathway to commonhold.

While challenges remain in implementation and transition, these reforms lay the foundation for a simpler, more transparent, and fair property system in England and Wales.

For those looking to buy, sell, or invest in property, staying informed on these changes will be crucial in the coming months.

Here’s one more thought to leave you with though…

We believe that speculators may now be tempted to look again in earnest at below-market-value (BMV) homes for sale which are marketed at a reduced price specifically due to having a low lease.

Once this leasehold reform comes in, if it does become significantly less expensive than it currently is to extend a low lease – and to remove ground rent at the same time – the inherent value of those low lease properties will increase fast.

Potentially a money spinner for a savvy investor buyer, or a chance for first time buyers to get themselves on the ladder and immediately increase equity – noting of course that short-lease purchases currently suffer from vastly reduced mortgage options.