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Reform of the leasehold system has been an ambition of several previous UK governments. Looking back, the Commonhold and Leasehold Reform Act 2002 was an attempt to establish a long-term alternative to leasehold ownership of flats, and other properties. However, since its introduction, commonhold ownership has failed to overhaul the more established leasehold framework. 

Aware of the slow take-up of the commonhold model, the current Government has been making headlines recently with its plans to introduce leasehold reform legislation in this parliamentary year. Their first step was the publication of the Commonhold White Paper in March 2025, which contained proposals to ban the creation of new leasehold flats, phase out the leasehold system, and encourage a commonhold system.

In reality, the timetable for reform looks set to take years, not months. And with around five million existing leasehold properties in England and Wales, the current issues relating to defects in a lease, or leasehold properties in general, will continue to present problems for buyers and their lenders for some time. 

We have a wide range of policies specifically related to defects in a lease and the practical issues affecting leasehold properties, which offer protection against future claim losses arising. They are designed to help transactions proceed without the need for all relevant parties agreeing to change the terms of a lease through a deed of variation - a costly and time-consuming process. Our most frequently obtained policies include:

• Absent landlord – despite being absent, unresponsive or even unknown for a significant period of time, a landlord may reappear after a sale/purchase and seek to enforce the terms of the lease. In these circumstances our policy provides cover for unpaid ground rent, lack of consent for assignment of the lease and the breach of leasehold covenants due to previous alteration works at the property.
  
  
• Contingent buildings insurance – any flat or building faces the risk of being damaged or destroyed by fire, flood, or a storm. If this occurs, and all or part of the building hasn’t been adequately insured, as required, by either the landlord, or other leaseholders in the building, both the leaseholder and the lender of the individual flat will suffer a financial loss if the building can’t be repaired or reinstated. In this scenario, our policy provides contingent cover for any material damage risk usually picked up by a comprehensive buildings insurance policy.
  
  
• Forfeiture of Lease (bankruptcy) – landlords often include a condition in a lease which permits them to re-enter or take possession of the premises if the leaseholder becomes bankrupt. Our policy protects the lenders’ security in these circumstances, when the landlord has exercised their right of re-entry.
  
  
• Good leasehold title – cover is provided to protect against the risk that a third party challenges the historical good leasehold title granted by the Land Registry for the property. Cover is also available as a combined policy with absent landlord.
  
  
• Housing Act repossession – forfeiture of lease proceedings should only be issued for non-payment of ground rent under a long lease. However, where the rent arrears exceed £250 (or £1,000 in London), the Housing Act legislation allows landlords to evict leaseholders for non-payment using the much quicker process meant for tenancy agreements. Our policy offers protection for the lender’s security, when the landlord has successfully issued an eviction notice and exercised their right of re-entry.
  
  
• Leasehold restrictive covenants – our policy provides cover for buyers and their lender, if the landlord attempts to forfeit the lease, due to a breach of covenant arising from alteration works carried out by a previous owner. We also offer a combined policy including the lack of building regulations consent from the local authority for any unauthorised works. 
  
  
• Maisonette/Flat (defective repairing covenants) – when the leases of flats in a building do not contain adequate repairing arrangements, a policyholder’s property may sustain damage due to other areas of the building falling into disrepair. In these cases, cover is required as it may not be possible for the policyholder to ensure that the necessary repairs are undertaken. Alternatively, they may be unsuccessful in obtaining the necessary rights of access for the repair works, or for payment contributions towards maintenance or repair from other property owners in the building. Cover can also be combined with absent landlord and contingent buildings.
  
  
• Missing mortgagee protection clause – some residential leases (particularly older leases) don’t contain a mortgagee protection clause. This requires the lender to be notified if a landlord intends to start forfeiture proceedings against the leaseholder, for a breach of the terms of the lease. Our policy protects lenders in this scenario, as they may be unaware that forfeiture proceedings are taking place. Without this knowledge, lenders will be unable to respond and claim relief from forfeiture – putting them at risk of a financial loss under the mortgage if a lease is forfeited.
  
  
• Missing/illegible lease plans - our policy protects buyers and lenders if there is a challenge to the absolute leasehold title to the property (or part of it), as a direct result of the lease plan being missing. We can also offer cover where the missing or incorrectly coloured lease plan affects rights of access, easements for services or rights to use other communal areas, such as cycle or bin stores that have been granted in the lease, but are ineffective due to an issue with the plan.

There are so many different scenarios where legal indemnity insurance may be required for a leasehold property. Whatever defect may be causing a concern for your next transaction, call our team on 01603 617617, email enquiries@cli.co.uk, or sign in to Elite.