On 3 March 2025, changes in the Leasehold and Freehold Reform Act 2024 (LFRA 2024) intended to enable leaseholders to more easily exercise their right to manage (RTM) came into force. On the same day, the Government also published its Commonhold White Paper setting out in more detail its intention to overhaul the leasehold system. 

So, what does this mean for landlords?

RTM Changes

The technical bit

The Commonhold and Leasehold Reform Act 2002 (CLaRA 2002) sets out the right to manage for long leaseholders of flats subject to various qualification criteria. Note it does not apply to leaseholders of local housing authorities.

The Leasehold and Freehold Reform Act 2024 (Commencement No. 3) Regulations 2025 bring into force changes to the RTM regime by provisions in LFRA 2024 amending the relevant provisions in CLaRA 2002. These changes came into force on 3 March 2024 and are the latest step in the staggered implementation of changes under LFRA 2024 intended to strengthen the rights of residential leaseholders.

In practice

In summary, the changes are:

• The non-residential exclusion for ‘qualifying premises’ now only applies where the non-residential floor area exceeds 50%: it was previously 25%. 
• The RTM company is no longer liable for the landlord’s reasonable costs incurred in connection with a RTM claim. Liability for the landlord’s costs is restricted to:
  • Reasonable costs incurred in providing information before the RTM claim; and
  • By order of a tribunal/court in particular circumstances.

The costs incurred by the landlord can not be recharged through the service charge.

• To update the model articles for new RTM companies as set out in The RTM Companies (Model Articles) (England) (Amendment) Regulations 2025 and the RTM Companies (Model Articles) (Wales) (Amendment) Regulations 2025 to reflect the changes.

What should RP landlords do now?

• Update any leasehold policy and/or procedure and parts of your website that reference the RTM to reflect the changes.
• Brief staff dealing with queries from leaseholders about the changes so they can deal with any RTM queries correctly.
• Prepare for a potential increase in RTM claims (we can support you in this if required).
• Decide which team's budget the costs incurred will come from (noting that generally these cannot be recharged to leaseholders). 

Commonhold White Paper

The technical bit

Commonhold is not a new concept. It was introduced in CLaRA 2002, but has just never really taken off in England and Wales in the same way it has in a number of other countries. Buildings with a number of units in have continued to be let on a long lease basis where a proprietary interest is sold.

The Government has set out its intention in the White Paper (confirming previous announcements) that it intends to take forward the Law Commission’s recommendations from 2020 to overhaul the leasehold system.

The White Paper sets out:

• The intention to publish a Leasehold and Commonhold Bill (the Bill) later in the year. This will initially be published in draft for feedback and then introduced into Parliament.
• The Bill would generally prohibit the granting of any long leases of flats on new schemes, meaning commonhold will have to be the default tenure. However, there will be exceptions for shared ownership and home purchase plans (defined as ‘a financial arrangement with a bank or other lender whereby an individual can purchase their home in a manner which conforms with religious norms governing prohibition of interest payments’), which will then operate in the commonhold regime. The Government is also considering if any other exceptions need to be made.
• Under the commonhold regime:
  • Unit owners will be members of the commonhold association where they collectively make decisions about block management.
  • The rights and responsibilities of the commonhold association and the unit owners will be set out in the standard form of Commonhold Community Statement (CCS). The association may vote for local rules to suit the particular scheme (provided they do not contradict the CCS). For example, the local rules may be used to restrict use of a unit for short term lets or set standards of repair required. Changes will require 75% agreement of members in the commonhold association. 
  • The commonhold association will need to agree a yearly maintenance budget and can set up a reserve fund. Payment of these charges by the unit holders is akin to service charge payments leaseholders currently pay.
  • There may be separate sections and separate heads of costs, so that only those with access to certain services will (i) be able to influence management of those services, and (ii) be required to pay for them. This is intended to make commonhold work better for mixed use development and larger schemes.
  • Mediation for disputes would be encouraged, with the First-tier Tribunal (Property Chamber) hearing disputes that could not be resolved out of court.
  • There would be no forfeiture so there is no risk to the unit owner of losing their equity. However, giving the potential significant impact non-payment of charges could have on a commonhold association (these payments will be the association's only income), the association will have the right to apply to court for an expediate order to sell a unit if a unit holder fails to pay, with protections to safeguard the unit owner (e.g. retaining equity less debt due) and to alert the lender to any changes.
• The intention to make conversion of existing leasehold schemes to commonhold easier. The Government is still exploring options as to how best to achieve that. 

What should RP landlords do now?

For those in development in particular, read the White Paper. It sets out a clear explanation of the commonhold system and a glossary of key terms. Commonhold is not a concept widely understood (many property lawyers will be dusting down their old textbooks!), but will have to be moving forward. For more detail about the commonhold regime, listen to a podcast from my colleagues Emma Lloyd and Raj Flora-Seehra – this is primarily aimed at local authority landlords but the principles are the same for all.

The initial rollout will be to new schemes. The Government clearly wants the Bill to be passed, and potentially in force, by the (intended) end of this Parliament, so just over another four years. Given the level of reform this is ambitious! Make sure the schemes you are designing now and in the future, will be suitable for commonhold tenure, in particular thinking about different sections and heads of costs.

Prepare for questions from existing leaseholders about potential conversion, especially given the mainstream press attention to the reforms. You can let them know about the timings for reform and also advise them to take independent specialist legal advice if they want to explore conversion now.

Keep an eye out for our further updates, particularly when the draft Bill is published.

For any questions about these changes or leasehold reform generally, please contact Emma Hardman.