Commonhold: the future of flat ownership

If you live in England and Wales and plan to buy a new build flat in the future, there’s a high chance it will be sold as commonhold. If you own an existing leasehold flat or plan to purchase one, it should become easier to switch from leaseholder to commonholder in the next few years.

Looking to Scotland for a new standard

Living in Scotland? Congratulations! Your country has already developed an alternative to the feudal leasehold system. Your ‘heritable interest’ and ‘ownership’ structure, which means almost everyone who buys a flat in Scotland does so on a commonhold basis, is the blueprint for England and Wales.

The current Government is seeking to overhaul the tenure of flats with its Leasehold and Commonhold Reform Bill, with a new commonhold model already detailed in a White Paper. Although a draft Bill is expected later this year, we do know Labour wants commonhold to be the standard flat tenure by 2029. To achieve this, new build flats sold as leasehold will be banned.

What about existing leaseholders? 

They haven’t been forgotten. It is already possible to switch from leasehold to commonhold thanks to the Commonhold and Leasehold Reform Act 2002.

Adoption has been disappointing, however. This has been due to the requirement for all leaseholders in a block to unanimously agree on the decision to adopt commonhold status. The switch also involves a complex legal framework to navigate and there is a current reluctance among mortgage lenders to loan on commonhold properties.

Better news is on the horizon for the estimated 5.25 million leaseholders in England and Wales. The Leasehold and Commonhold Reform Bill also seeks to reinvigorate the commonhold tenure by modernising the legal framework, taking into account suggested reforms put forward by the Law Commission.   

Living like common people

The definition of common is for something to be shared by two or more people, or a group. In property terms, a commonholder will own the freehold of their property and be known by the term ‘unit owner’. A commonhold association is automatically formed when a block is occupied, made up of unit owners. With commonhold, there’s no lease that will expire and no ground rent to pay, as the commonhold association owns the land, the building and its associated communal areas.

That doesn’t mean it’s a cost free tenure. Instead of leaseholders paying a service charge to a property management company to carry out maintenance and repairs, they pay a fee to the commonhold association.

Commonhold was developed to give homeowners more control of how funds are spent, greater freedom to get quotes and pool resources, and the ability to self-manage and save money.

That said, commonhold only works if the commonhold association shares the same vision, agrees on expenditure and has enough like-minded unit owners willing to put in the hours. If this is not the case, the commonhold association can appoint a property company to manage the building on their behalf. 

Commonhold association responsibilities

• A commonhold association is responsible for but is not limited to:

• Tending to communal gardens

• Acquiring all insurances needed

• Building safety and security

• Car parks, lifts and communal amenities

• Shared receptions, hallways and corridors

• Building light, power and heating

• Finding and booking tradespeople

• Collecting and securing service charges

• Budgeting

• Organising meetings with commonholders

• Managing specialist contractors

• Adhering to the ‘rulebook’ - the Commonhold Community Statement – which sets out the rights and obligations of each unit owner

• Resolving disputes

The involvement of the above may leave some leaseholders feeling more comfortable with a third-party managing their block, therefore making commonhold easier, will be music to the ears of flat owners who feel they are being fleeced. As ever, having choice is a beneficial luxury.

We’re tracking the progress of the Leasehold and Commonhold Reform Bill as the Government prepares to add detail. In the meantime, we’re here to answer any questions you may have about leasehold, freehold and commonhold tenures.