Article Summary
The UK Government plans to launch a consultation to ban new leasehold flats and shift to commonhold ownership, which will significantly change property ownership and management. This reform will impact buy-to-let landlords, who will need to adapt to the new system, including ownership rights and service charge structures. Mortgage brokers will play a crucial role in helping landlords navigate these changes.
What This Means for You
- Be prepared for the phase-out of leasehold flats and the transition to commonhold ownership, which will affect ownership rights and service charge structures.
- Understand the benefits of commonhold ownership, such as permanent ownership, ground rent cuts, and greater control over service charges.
- Collaborate with mortgage brokers to navigate the legal and financial implications of this shift, ensuring your property portfolio remains future-proof.
- Stay informed about the draft Leasehold and Commonhold Reform Bill, which is expected to be published later this year, and its impact on the property market.
Original Post
The UK Government will launch a consultation later this year in a major reform to property ownership, with a plan to ban new leasehold flats. This will mark one of the most significant changes in the property industry in decades.
For buy to let (BTL) landlords, the shift to commonhold brings both challenges and opportunities, impacting everything from ownership rights to service charge structures, requiring landlords to reassess how they manage and invest in properties.
The end of leasehold
As part of the Leasehold and Commonhold Reform Bill, the government is planning to launch a consultation to ban new leasehold flats and explore an appropriate way forward. This move aims to address longstanding criticisms of the leasehold system which has been viewed as outdated and unfair to homeowners. With commonhold ensuring permanent ownership, ground rent will be cut and homeowners will have greater control over service charges, eliminating many of the pitfalls associated with leasehold ownership.
Leasehold vs commonhold – what this change means for BTL landlords
Commonhold properties enable flat owners to collectively own and manage the entire building, with shared areas managed collectively through a commonhold association, allowing a more collaborative approach to property management.
No ground rent is charged and while third-party management companies can still be used, commonholders will have more control over their appointment. With potentially fewer charges for landlords, there should be less pressure to pass rising costs onto tenants, meaning costs could be lower and more predictable.
How can brokers support landlords with commonhold properties?
As the property market moves towards commonhold ownership, brokers have a vital role to play in helping landlords understand and adapt to the new structure. By educating clients on how the future ban will affect their properties, brokers can help them to make informed decisions on property management while also building trust with clients.
With the government aiming to make commonhold the standard tenure by the end of this parliament, mortgage brokers have an opportunity to lead in this evolving market. By staying informed, brokers can offer essential guidance to landlords, helping them adapt with confidence and future-proof their property investments.
Jonathan Stinton is head of intermediary relationships at Coventry for intermediaries
Key Terms
- Leasehold reform
- Commonhold ownership
- BTL landlords
- Property management
- Mortgage brokers
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