The Government has said it will ban the sale of new leasehold flats in England and Wales.

Housing minister Matthew Pennycook described the system as ‘feudal’ as he announced plans to move to the commonhold system, which is already standard for apartment owners in Scotland and other parts of the world. 

There are around 5million leaseholders in England and Wales, most of whom live in flats – though there are leasehold houses which are often on managed estates.

Under leasehold, a freeholder owns the building and the land it is built on, and leaseholders purchase the right to occupy it for a certain period of time – for example a 120-year lease.

They also pay service charges to the freeholder for maintenance of the common areas. 

This practice has come under fire in recent years as leaseholders have complained of inflated charges and a lack of transparency.

Changes: The Labour Government has said it will ban new flats from being sold leasehold

Leasehold service charges saw a record annual increase in 2024, according to the estate agent Hamptons.  

Leaseholders may also pay a ground rent, something which is set to be banned under the proposed reforms.

Under commonhold, each flat owner would own the freehold of their home, but also have shared responsibility for common areas and upkeep.

The Commonhold White Paper published by the Ministry for Housing, Communities and Local Government states that commonhold will be ‘reinvigorated’ through a new legal framework and the sale of new leasehold flats will be prohibited. 

Ending the leasehold system was included in Labour’s election manifesto.

What about those who already own a leasehold? 

Questions have been raised over what the changes mean for those who already own leasehold homes.

Pennycook said: ‘This Government promised not only to provide immediate relief to leaseholders suffering now but to do what is necessary to bring the feudal leasehold system to an end – and that is precisely what we are doing.

‘By taking decisive steps to reinvigorate commonhold and make it the default tenure, we will ensure that it is homeowners, not third-party landlords, who will own the buildings they live in and have a greater say in how their home is managed and the bills they pay.

‘These reforms mark the beginning of the end for a system that has seen millions of homeowners subject to unfair practices and unreasonable costs at the hands of their landlords.’

Katie Kendrick is a children’s nurse from Ellesmere Port who is the founder of the National Leasehold Campaign. 

She said: ‘While focusing on preventing future leasehold abuses is crucial, it’s equally vital to address the plight of existing leaseholders currently bound by the inequitable leasehold system.

‘Commonhold conversion mechanisms are essential to offer an escape route for those trapped, alongside tackling issues like existing ground rents, reforming the valuation process for enfranchisement and regulating managing agents.’

The Government has said it is ‘determined’ to make conversion to commonhold easier for existing leaseholders.

However, this could be a challenge because it would most likely require freeholders to give up their ownership of existing buildings, and the income they receive from ground rents and lease renewals. 

A draft Leasehold and Commonhold Reform Bill, which will include the detail of how reformed commonhold will work, will be published later this year, the Ministry of Housing, Communities and Local Government has said.