Leasehold reform has been one of the most hotly debated topics in UK property for years — and the latest developments in Parliament suggest we are still some distance from the finish line. Here is what property investors and leaseholders need to understand right now, including a significant gap in the legislation that has only just come to light.
Where We Are with the Leasehold and Commonhold Act
When the Conservatives passed the Leasehold Reform (Ground Rent) Act, many leaseholders breathed a cautious sigh of relief. However, while parts of it came into force, the broader bill — which would have enabled cheaper lease extensions, 990-year leases, and better service charge controls — never became fully active law. Then Labour came into government and effectively started again, introducing what is now being worked through Parliament as the Leasehold and Commonhold Act.
The new Act builds largely on its predecessor and includes several headline measures:
- Capping ground rent at £250, providing some immediate relief for leaseholders stuck with escalating charges
- Banning new leasehold houses, continuing a policy direction established under the previous government
- Enabling leaseholders to collectively buy out their freeholder and convert their arrangement into a commonhold — a structure that, as any investor with a share of freehold will tell you, makes mortgages easier to arrange and property values higher
- Greater powers to challenge service charges, potentially allowing leaseholders to remove underperforming management companies
These are meaningful steps forward. However, a significant problem has just been exposed in Parliament that the drafters of the Act appear to have overlooked entirely.
The Embedded Management Company Problem
During a recent parliamentary session, Labour MP Neil Duncan Jordan raised the issue of embedded management companies — and the government's response was, frankly, alarming. The minister confirmed that the Leasehold and Commonhold Act, as currently drafted, makes no provision for this situation whatsoever.
So what is an embedded management company? When a developer completes a new build project, the management company responsible for communal areas, maintenance, and building upkeep is often written directly into the lease at the point of completion. It is baked in from day one. Unlike standard leasehold arrangements where leaseholders may have a route to remove or replace a failing management company, those with an embedded arrangement have almost no recourse.
The real-world consequences of this are significant. Imagine a development of 50 properties where the management company is responsible for roofs, windows, and doors across the entire site. Without adequate reserves — a problem that plagues countless developments — essential repairs simply do not happen. Service charges remain a source of constant friction, yet nobody agrees to raise them. Meanwhile, leaseholders are left attending management meetings that go in circles, or worse, being asked to volunteer their weekends to clean communal grounds and paint railings just to keep costs down.
The fact that this gap was not identified until an MP raised it in Parliament suggests the Act has been drafted without sufficient input from those with genuine on-the-ground experience of how leasehold problems actually manifest. One would hope this omission is addressed before the legislation is finalised — but we should not assume it will be.
High Court Challenges Are Slowing Progress
Even the parts of the legislation that have already been put forward are facing headwinds. Freeholders have launched a High Court challenge to the ground rent cap provisions. They lost the first round, and many expected any appeal to be dismissed — but a judge has since granted leave to appeal, which means the matter will now return to the High Court. This is causing further delays to an already slow-moving process.
For leaseholders sitting on short leases and waiting for the Act to make extensions cheaper, this uncertainty is genuinely frustrating. One pragmatic approach worth considering: approach your freeholder directly and use the incoming legislation as a negotiating tool. By demonstrating that — under the new rules — they are likely to receive considerably less in the future, you may be able to agree a discounted extension now. It is not guaranteed, but freeholders are aware of the direction of travel and some will prefer a certain sum today over a smaller one in two to five years' time.
If you are managing the financial side of a growing portfolio through all of this, it is worth having specialist advice in your corner. Provestor — Property Accountant is a firm that specialises exclusively in property investors and landlords, helping you structure ownership and manage tax efficiently — exactly the kind of support that matters when legislation is shifting beneath your feet.
What Should Property Investors Do Now?
We would not recommend sitting on your hands waiting for the Leasehold and Commonhold Act to deliver everything it promises. Legislation of this complexity takes time, faces legal challenges, and — as we have just seen — can miss significant issues entirely. Instead, factor leasehold risk carefully into every purchase decision. Avoid leasehold houses unless you have thoroughly understood all the contractual obligations, including any sale-related fees payable to a management company. Investigate whether any management company is embedded in the lease before you buy. And if you are looking at flats, check the service charge history and the health of the reserve fund.
At PropertyAlert.uk, we help property investors like you identify opportunities across the UK market — including filtering by leasehold and freehold status so you can make informed decisions before you commit.
We will continue to track the progress of the Leasehold and Commonhold Act and bring you updates as they emerge. In the meantime, do your due diligence, take specialist advice, and do not let legislative delays dictate your investment strategy.
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