Commonhold vs Leasehold: The Leasehold and Freehold Reform Act 2024 Explained

For millions of flat owners across England and Wales, leasehold has long been a source of frustration: ground rents that escalate unpredictably, lease terms that tick down and reduce property value, and freeholders who hold considerable power over service charges, alterations and subletting. The Leasehold and Freehold Reform Act 2024 represents the most substantial overhaul of property tenure law in a generation.

This guide explains what has changed, what commonhold is and what it means if you own or are thinking of buying a leasehold flat.

The Problem with Leasehold

When you buy a leasehold flat in England and Wales, you are buying the right to occupy the property for the duration of a lease — typically 99, 125 or 999 years — rather than owning the land and building outright. The freehold is owned by a separate landlord, who may charge ground rent, must consent to alterations and subletting, and manages shared areas through a service charge.

This has created a series of well-documented problems:

Declining lease terms. A lease with fewer than 80 years remaining becomes more expensive to extend due to a component called "marriage value." Lenders frequently refuse mortgages on leases below 70 years. Short leases trap owners in a cycle of costly extensions or unsaleability.

Ground rent escalation. Historically, leases included ground rents that doubled every 10 or 25 years. A ground rent of £250 in 1990 might be £8,000 today. Ground rents with escalation clauses became nearly unsellable following lender withdrawals.

Service charge opacity. Freeholders and managing agents could charge for works without transparent procurement, with limited ability for leaseholders to challenge costs.

Enfranchisement cost. Buying the freehold collectively (enfranchisement) or extending a lease required paying a premium calculated using a formula that critics argued was weighted too far in favour of freeholders.

The Leasehold and Freehold Reform Act 2024

The Act received Royal Assent on 24 May 2024. Its provisions are being implemented in stages, with secondary legislation and guidance required for several provisions.

Ban on New Leasehold Houses

The Act bans the creation of new leasehold houses in England and Wales, with limited exceptions. Historically, some developers sold houses on leasehold terms — sometimes with escalating ground rents — despite houses having no logical reason to be leasehold. New houses must generally now be sold freehold.

Exceptions apply to certain retirement housing and a small number of other defined circumstances. Flats remain leaseable but are subject to the other reforms below.

Removal of the Two-Year Rule

Under the old legislation, a leaseholder had to have owned their property for at least two years before they could serve a statutory notice requesting a lease extension or to buy the freehold. This disadvantaged buyers of shorter-lease properties and those who needed to act quickly.

The 2024 Act removes this requirement entirely. From the point of completion, a buyer can begin the statutory process for lease extension or freehold purchase. This is particularly valuable when buying a flat with a lease of 85 years or fewer, where early action significantly reduces costs.

Changes to Lease Extension Terms

The Act extends the statutory lease extension term from 90 years added to the existing lease to 990 years added to the existing lease. A leaseholder with 70 years remaining who previously extended to 160 years will now extend to 1,060 years — effectively a permanent solution.

The ground rent during the extended term is set to zero (a peppercorn), eliminating ongoing ground rent liability for extended leases.

Valuation Reform: Lower Premiums

The premium payable for a statutory lease extension or collective enfranchisement (buying the freehold as a group) is calculated using a formula that takes into account:

• The value of ground rent foregone by the freeholder
• The anticipated reversion value of the property at lease expiry
• "Marriage value" (previously applicable where the lease had fewer than 80 years remaining)

The 2024 Act makes significant changes to this formula, including the abolition of marriage value and changes to the capitalisation and deferment rates used. The effect should be to reduce premiums — the amount leaseholders pay to extend their lease or buy the freehold — in many cases substantially.

The precise changes to capitalisation and deferment rates are being set through secondary legislation and may be subject to further consultation. Leaseholders considering extensions should take professional valuation advice to understand the impact on their specific property.

Service Charge Transparency

The Act introduces enhanced rights around service charges:

• Freeholders and managing agents must provide more detailed summaries of service charge accounts
• Leaseholders gain enhanced rights to challenge unreasonable charges through the First-tier Tribunal
• Requirements for competitive tendering for certain major works are strengthened
• Leaseholders have new rights to appoint their own managing agent in certain circumstances

Right to Manage

The Act makes it easier for leaseholders to take over management of their building through a Right to Manage (RTM) company. Previously, RTM companies could be excluded from managing buildings where the non-residential floor area exceeded 25% of the total. The Act reduces this to 50%, bringing more mixed-use buildings within the RTM regime.

What Is Commonhold?

Commonhold is the alternative to leasehold that exists in English and Welsh law under the Commonhold and Leasehold Reform Act 2002 — but which has barely been used in practice. Under commonhold:

• Each flat owner owns their unit as freehold
• The shared parts of the building (hallways, roof, foundations) are owned by a Commonhold Association — a private company limited by guarantee
• Every unit owner is automatically a member of the Commonhold Association
• There is no head freeholder — no landlord to pay ground rent to or seek consent from
• There is no lease running down — the ownership interest does not diminish over time

Commonhold was designed to mimic the model used in many other countries (condominium in the US, strata title in Australia) where flat owners have permanent, freehold-equivalent ownership with collective management of shared areas.

Why Has Commonhold Barely Been Used?

Since 2002, fewer than 20 commonhold developments have been created in England and Wales. The reasons are well documented:

• Mortgage lender reluctance. Most mainstream lenders refused to lend against commonhold until recently, citing unfamiliarity with the regime.
• Developer preference for leasehold. Developers retained considerable value in the freehold reversion and ground rent income stream — incentives that do not exist in commonhold.
• Conversion difficulty. Converting an existing leasehold building to commonhold requires unanimous consent of all leaseholders and the freeholder, which is almost impossible to achieve in practice.

What Is the Government Doing?

The Law Commission published detailed recommendations for commonhold reform in 2020, which formed the basis for subsequent government policy. The 2024 Act takes a number of steps towards mainstreaming commonhold but does not yet mandate conversion of existing stock or remove the unanimity requirement for conversion.

The government has stated its intention to make commonhold the default tenure for new flats in England and Wales and to consult further on facilitating conversion of existing leasehold buildings. As of mid-2026, enabling legislation for easier conversion has not yet been enacted.

Leasehold vs Commonhold: Key Differences

Lease term. Leasehold has a finite term (though now extendable to 1,060 years). Commonhold has no term — the freehold ownership is permanent.

Ground rent. Leaseholders pay ground rent to the freeholder (zero for new and extended leases post-reform). Commonhold has no ground rent.

Shared area ownership. In leasehold, shared areas are owned by the freeholder. In commonhold, they are owned by the Commonhold Association of which all unit owners are members.

Service charges. Both leasehold and commonhold require contributions to shared area maintenance. In commonhold, the Commonhold Community Statement sets out the rules for contributions, which unit owners collectively control.

Consent for alterations. Leaseholders typically need landlord consent for alterations. Commonhold unit owners are bound only by the Commonhold Community Statement, which they collectively agree and can collectively amend.

Selling and subletting. Leasehold often requires consent and fees for subletting. Commonhold restrictions, if any, are set in the Commonhold Community Statement.

What Should Existing Leaseholders Do Now?

Check your lease length. If your lease has fewer than 90 years remaining, you should consider extending it. Under the reformed valuation rules, the cost may be lower than before — but consult a specialist valuation surveyor.

Act early. With the two-year ownership requirement removed, new buyers of shorter leases can begin the extension process immediately. Waiting allows the lease to shorten further and costs to increase.

Consider collective enfranchisement. If you and your neighbours own more than 50% of the flats in your building, you may be able to buy the freehold collectively. Post-reform valuations may make this more affordable.

Review service charges. Leaseholders now have stronger rights to challenge unreasonable service charges. If you believe charges are inflated, take advice from a specialist leasehold solicitor.

Watch for further commonhold legislation. The regulatory landscape is evolving. If your building might be suitable for commonhold conversion when the rules ease, begin discussing it with neighbours now.

The Bottom Line

The Leasehold and Freehold Reform Act 2024 is a genuine improvement for the millions of leaseholders in England and Wales. Longer lease extension terms, zero ground rents on extensions, lower premiums through reformed valuations, the removal of the two-year wait, and the ban on new leasehold houses all move the dial significantly in favour of flat owners.

Commonhold remains the long-term ambition — a permanent, freehold-equivalent form of flat ownership without a landlord — but the path for existing leaseholders to convert is still complex. For now, the most practical benefit of the reforms is the improved economics of lease extensions and enfranchisement. If your lease has fewer than 90 years remaining, the time to act — and to take professional advice — is now.