The Intermediary – October 2025 - Flipbook - Page 42
BUY-TO-LET
Opinion
What is happening
with leaseholds?
L
easehold ownership has
long been a source of
frustration, but the pace
of change in the past two
years has been unusually
sharp. The Government’s
overhaul, anchored by the Leasehold
and Freehold Reform Act 2024, is
reshaping the legal framework and
could alter the economics of buying,
selling and managing these properties.
For brokers and landlords, the
question is no longer whether reform
is coming. It is how to navigate the
transition and position clients for
what comes next.
The reforms in brief
The Act, which gained Royal Assent
in May 2024, removes the two-year
ownership requirement before a
leaseholder can extend their lease
or buy the freehold. Other major
provisions, including a 990-year
lease extension term and reducing
ground rent to a peppercorn are in
the legislation but not yet active.
Secondary legislation will be needed,
and timelines are uncertain.
Transparency is another pillar
of reform. Leaseholders will gain
stronger rights to challenge service
charges and building insurance fees,
with landlords required to provide
detailed breakdowns. The Act also
proposes removing the presumption
that leaseholders must cover a
landlord’s legal costs in disputes,
though this is awaiting the outcome of
a judicial review.
Alongside these measures, the
Government is pursuing a phased shi
to commonhold for new flats, aiming
to remove the traditional landlordtenant dynamic. The March 2025
Commonhold White Paper confirmed
the ambition to make commonhold
the default tenure for all newly built
flats, with a dra bill expected in the
second half of 2025.
Consultation is under way on
lowering the consent threshold for
40
The Intermediary | October 2025
converting existing buildings to
commonhold from 100% to 50%,
though complex mixed-use sites
remain a sticking point.
MARTIN SIMS
is distribution director at Molo
Market implications
For buy-to-let (BTL) investors,
the most immediate impact will
be on the economics of leasehold
holdings. Eliminating ground rent
removes a recurring income stream
for freeholders, and the 990-year
extension effectively removes lease
length as a value lever. Investors
who relied on purchasing properties
with shorter leases at a discount and
extending them for capital gain will
find the model less viable.
Commonhold presents a more
complex picture. While it offers
buyers greater control and may
simplify management in the long
term, adoption will be gradual and
uneven. In mixed-use developments,
aligning residential and commercial
interests is rarely straightforward. For
investors, due diligence on a building’s
governance and reserve funds will
become as important as location and
yield projections.
Risks and opportunities
The reforms are designed to level
the playing field, but transitional
uncertainty could disrupt transactions
in the short term. Some buyers may
delay commiing until secondary
legislation is in place, particularly for
high-value leasehold flats in prime
markets. Legal challenges, such as
the judicial review on marriage value
and ground rent caps could also
delay implementation or water down
certain provisions.
There are opportunities for
landlords willing to adapt. Greater
transparency could help professional
operators differentiate themselves
from less organised competition.
Properties in developments that
already operate with clear, fair cost
structures may command a premium
Reforms are designed
to level the playing
field, but transitional
uncertainty could disrupt
transactions [...] some
may delay committing
until secondary
legislation is in place”
in the new environment. For brokers,
educating clients now on the likely
direction of reform could build trust
and position them as go-to advisers.
Investor strategy
The shi from leasehold to
commonhold has the potential to be
one of the most significant structural
changes in UK housing in decades. But
as with any systemic reform, the real
test will be in the details of execution.
Investors will need to balance caution
with agility, tracking legislative
milestones and watching for market
signals that point to emerging
buyer preferences.
In the meantime, the fundamentals
of property investment remain:
understanding the asset, the costs of
ownership and the depth of demand in
the target market. Leasehold reform
changes the rules of the game, but not
the need for disciplined strategy. ●
