Leasehold properties could face marketability challenges as the government moves towards commonhold ownership, according to a property lawyer responding to recent consultation proposals.
Caroline Wild, Counsel in Forsters’ Real Estate Disputes team, has raised concerns that current reform proposals risk creating a two-tier property market where commonhold is perceived as superior to leasehold, potentially affecting both sales and mortgage availability for existing leasehold properties.
Government consultation on commonhold
The warning follows the government’s consultation ‘Moving to commonhold: banning leasehold for new flats’, which launched in January and closed last week. The consultation addresses the planned ban on new leasehold flats in England and Wales.
Wild stated: “While most stakeholders generally welcome the concept of leasehold reform, the submissions highlight some legitimate concerns about a hasty move to commonhold. As they currently stand, the proposals risk creating a two-tier market in which commonhold is seen as superior and leasehold properties become harder to sell or mortgage.”
Impact on existing leaseholders
The lawyer highlighted that the draft bill focuses on future commonhold developments whilst providing no practical, affordable or time-bound conversion route for existing leaseholders. This could leave current leasehold owners in a disadvantaged position compared to new commonhold properties.
Wild noted particular concerns for leaseholders who have collectively purchased their freehold interests. The proposed ground rent cap could significantly reduce the value of these investments for those who acquired ground rents of non-participating flats, potentially penalising leaseholders who took proactive steps.
These concerns add to existing pressures facing the flat sales market, where supply and demand dynamics are already shifting.
Industry recommendations
Stakeholders responding to the consultation have argued that policy changes must benefit both new commonhold and existing leasehold properties to prevent market division. Wild emphasised that the bill requires strengthening with clear pathways to remove practical barriers to conversion.
Several respondents have recommended a phased implementation approach over seven to ten years, allowing the property industry time to adapt and creating lasting cultural and educational change. This timeframe would aim to better serve those intended to benefit from the new system.
The concerns reflect broader regulatory changes affecting the property sector, including ongoing debates around rental reforms and how legislative changes impact different market participants.
The government has not yet announced when it will publish responses to the consultation or provide a timeline for implementing the leasehold ban and commonhold transition.