Labour's leasehold reforms could leave millions of flats unsellable, critics warn

The plans, led by deputy prime minister Angela Rayner, would ban new leaseholds, introduce commonhold ownership and cap ground rents at £250 before phasing them out entirely by 2068.

Critics argue the changes risk creating a two‑tier housing market, with buyers potentially favouring new commonhold properties over existing leasehold flats that remain subject to charges and legacy arrangements.

Concerns from current leaseholders featured prominently in the consultation responses.

One said: “The draft Leasehold and Commonhold Reform Bill will not end the feudal leasehold system for me and my long‑suffering neighbours,” adding that it would instead “condemn us to ongoing financial abuse in a two‑tier system”.

Another respondent said a divide had already emerged following the 2022 ban on ground rents for new leases, leaving existing leaseholders at a disadvantage.

Caroline Wild, a solicitor at Forsters, warned that the proposals could leave current leaseholders without a clear route forward.

“The draft bill prioritises future commonhold developments while offering no practical, affordable or timebound route for existing leaseholders who could be left trapped; worse off than before,” she said.

Financial services organisations also raised concerns about the cost and complexity of implementing the reforms.

UK Finance said adapting systems to support commonhold structures would require significant investment, noting: “This work will likely cost individual mortgage firms multi‑millions of pounds to implement.”

Pension funds expressed similar worries.

Nationwide, which manages a £7billion pension scheme, said retrospective limits on ground rents could affect investor confidence and “damage the international reputation and appeal of the UK as a place of investment.”

The reforms face additional challenges following delays to existing legislation.

The Leasehold and Freehold Reform Act, passed in May 2024, has been slowed by legal disputes, and a recent Court of Appeal ruling in favour of landowners Cadogan Estates and Grosvenor has added further uncertainty.

The Ministry of Housing rejected claims that the proposals would negatively affect existing leaseholders.

A Labour spokesman said: “This is not true,” adding that the reforms would make buying and selling leasehold flats easier by capping ground rents, increasing transparency on service charges and giving homeowners more control through commonhold.

“Far too many people have fallen victim to the feudal leasehold system across the country,” the spokesman said.

“That is why we are taking action to end it for good.”

There are around five million leasehold properties in Britain, the majority of them flats.

Property values in London have fallen by 4.2 per cent over the past year.