Commonhold and RTM reforms are set to reshape the future of flat ownership, but for mortgage lenders, the key issue remains clarity rather than political ambition or simplified narratives, says Shabnam Ali-Khan, Partner at Russell-Cooke and member of the Association of Leasehold Enfranchisement Practitioners (ALEP) in the following exclusive article.
When commonhold and Right to Manage (RTM) are discussed, they are often grouped together as a means for leaseholders to ‘gain control’.
For mortgage lenders, that is too vague to be useful right now. RTM changes who manages a building within the leasehold structure; commonhold changes the ownership structure itself. That distinction is important because lenders do not assess slogans; they assess security, value, saleability, enforceability and risk.
This matters because the scale is enormous. The MHCLG estimates that there were 4.90 million leasehold dwellings in England in 2024-25, equivalent to 20% of the housing stock.
Of those, 3.38 million were flats. The House of Commons Library has also noted that 98% of flat sales recorded by HM Land Registry in 2024 were leasehold. In other words, the reform of flat ownership is not a peripheral matter for mortgage lending. It goes to a large part of the market.
Control and ownership are not the same
The first practical point is that RTM and commonhold solve different problems. RTM is a no-fault statutory right that allows qualifying leaseholders to take over management functions without buying the freehold or paying a premium.
It can be highly useful where the problem is poor communication, weak maintenance, service charge dissatisfaction, insurance concerns or a lack of confidence in the managing agent.
The Leasehold and Freehold Reform Act 2024 (LAFRA) has already made RTM more accessible in some respects. Since 3 March 2025, the non-residential limit for RTM claims has increased from 25% to 50%, and leaseholders will generally no longer be required to pay the landlord’s legal costs in an RTM claim.
Commonhold is more fundamental. It removes the wasting lease, the landlord and tenant hierarchy and ground rent in the leasehold sense.
The commonhold association owns and manages the common parts, while individual owners hold their units as commonholders. That may offer a cleaner model for future flat ownership, but it also creates a different set of questions for lenders.
Commonhold
The fact that commonhold removes some leasehold problems does not mean it removes all property management risk. A block still needs insurance, repairs, reserve funds, building safety compliance and competent decision-making. The risk does not vanish; it moves closer to the owners and their commonhold association.
That is why lender confidence has been slow to develop. Commonhold has existed since 2002, but the current market is tiny. The House of Commons Housing, Communities and Local Government Committee has referred to just 18 commonhold blocks across England and Wales, comprising fewer than 200 homes. It is difficult for a market to build standardised lending practice around such limited volume.
The Government is now trying to change that by making commonhold the default tenure for most new flats. While I have no doubt that the system needs reform, I see moving a whole lending, valuation and conveyancing ecosystem towards commonhold as extremely complex, to the point that it would be unrealistic to make the change for all 4.9 million properties as soon as the necessary legislation is passed.
There will invariably be a steep learning curve for lenders, who will need to know how associations are governed, how contributions are collected, what happens if owners do not pay, how major works are funded, how building safety duties are met and how decisions affecting value are notified to mortgages.
Right to Manage
RTM is also relevant to lenders because it may become more common while commonhold reform develops. Practitioners are seeing a rise in RTM matters.
An RTM company may improve management, appoint a better agent, challenge weak practice and introduce more disciplined budgeting. It can also expose a building’s underlying condition. A block that has been underfunded, poorly insured or carrying unresolved building safety risk does not become lower risk merely because leaseholders take control.
For lenders, the key is not whether a building is leasehold, RTM-managed or commonhold in the abstract but whether it is properly governed and financially sustainable.
Are service charge or commonhold contributions being collected? Is there an adequate reserve fund? Are there major works liabilities? Is insurance available on acceptable terms? Are building safety obligations understood? Is the managing agent competent? These questions will matter under any tenure.
A cautious way forward
I support leasehold reform, but I do not think lenders should be asked to treat commonhold as simple merely because it is politically favoured.
Nor should leasehold be treated as beyond improvement in the meantime. ALEP is keen to work with Government on both: improving leasehold where it remains and advising on the wider implementation of commonhold.
The best outcome would be a market in which lenders are not forced to choose between an old model they understand and a new model they have not had time to operationalise.
Commonhold needs standard documents, clear guidance, trained professionals, reliable Land Registry processes, managing agents who understand the model and a sensible transition period. RTM needs better awareness, procedural clarity and realistic advice for residents taking control. In both models, property owners need to know what they are getting themselves into.
From a lender’s point of view, RTM may change the management risk profile of an existing leasehold block, and commonhold may change the security and governance model for future flats. Both can improve outcomes when used properly, but neither removes the need for careful underwriting, informed advice and competent building management.
