Commonhold may unlock a property's value, urges CEO
Government plans to replace the leasehold system could be very positive for the buy-to-let market, enhancing property values, suggests Matt Kimber (pictured), the chief executive of fintech lender Molo Finance – but he warns there are possible drawbacks too.
Kimber believes the UK’s buy-to-let sector, which he estimates is worth £1.4 trillion, stands at a crossroads, following the release of a white paper on the proposal by housing minister Matthew Pennycook. It sets out how the Government aims to dismantle a tenure system dating back to the Domesday Book. It would be replaced by commonhold, whereby flat owners collectively own and jointly manage their buildings, liberated from a freeholder’s grip.
“The industry’s landscape is about to be reshaped by the government’s pledge to abolish the centuries-old leasehold system by 2029,” Kimber told Mortgage Introducer. “This isn’t a mere policy tweak - it’s poised to redefine ownership, financing, and tenant dynamics across England and Wales. Pennycook’s vow to abolish this feudal relic, rooted in serfdom, where leaseholders are ‘second-class homeowners’, marks a generational pivot. With 4.9 million leasehold homes - 69% of them flats, the backbone of many buy-to-let portfolios - this represents a revolution for the sector.”
This is as important for buy-to-let landlords as it is for owner-occupiers, suggests Kimber. “While rental demand remains ferocious - Zoopla is tracking 15 tenants per property at the moment - margins are thin,” he said. “Commonhold could unlock value, making properties more attractive to tenants weary of freeholder neglect and poorly maintained blocks. A well-run building might retain occupants longer, or command premium rents, lifting yields.”
Kimber observes that there is also a potential flipside to this. “The transition, buying out freeholds under a yet-to-be-enacted formula from (former housing secretary) Michael Gove’s stalled reforms, could drain cash reserves with upfront costs and strain liquidity,” he reasoned, “and if commonhold governance falters – say, residents bicker over repairs - value could erode.”
For landlords, leasehold’s predictability, however flawed, offers a known quantity in terms of ground rents and service charges, acknowledges Kimber. “While commonhold promises fairness, potentially slashing those expenses and boosting yields, it introduces unknowns,” he said.
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Why is leasehold controversial?
In Kimber’s view, leasehold is a long-maligned system known for exorbitant service charges, ground rents - capped at zero for new leases since 2022 - and freeholders ‘sweating the asset’ while neglecting repairs, which means crumbling infrastructure. “Of course, the abolition of leasehold isn’t a done deal,” he said. “Pennycook’s team is weaving safeguards - strict management rules to reassure us buildings won’t crumble. Campaigners grumble at delays but Gove was famously effective and it defeated him. Legislative change is not inevitable.”
Kimber doesn’t believe anyone is going to mourn the end of leasehold, other than some of the big, landed estates. “Reform is not in the best interests of some of the major estates in London,” he said. “These estates wield immense sway, collecting millions in rents annually from freehold properties leased to residents and businesses. They face a profound shift. This transition away from leasehold will ripple through their centuries-old business models, challenging their revenue streams, control over properties, and strategic positioning.”
For landlords, commonhold should be a call to rethink their portfolios, Kimber urges. Some of the savvier ones may be able to snap up bargains, if prices dip temporarily during any resulting uncertainty. Meanwhile, for lenders it’s a prompt to stay agile, he suggests, and financing properties may require them to rethink risk models, especially if management falters. “The UK rental market has weathered storms before, bending but not breaking under pressure,” Kimber said. “We’ve faced Brexit, surcharges and tax hikes. This latest shift, rooted in fairness and modernity as it is, will nonetheless test that resilience anew.” He added: “As a lender, we’re not a bystander. Leasehold properties have been bedrock collateral - tangible, if imperfect. Will commonhold buildings hold value as reliably as leaseholds once did? We’re optimistic, provided governance holds up.”
