Discover more about the government’s new plans to promote commonhold as a viable alternative to leasehold.
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With leasehold reform still a battleground of competing interests, the government has launched a Commonhold Council of leading property industry experts to advise them on the implementation of a reformed commonhold regime.
Housing Secretary, Robert Jenrick, said this formed part of the government’s attempts to usher in the most significant reforms to property law in England for 40 years.
Commonhold and Leasehold Reform Act 2002
The Commonhold and Leasehold Reform Act 2002 introduced into English and Welsh law the first new type of property ownership in over 75 years. Commonhold was seen as the answer to the multiple problems created by long leases.
A commonhold scheme can only be created out of freehold property, either land or a building (which can be new or existing). The commonhold comes into effect as soon as the property is registered as a commonhold at the Land Registry. The commonhold framework is quite straightforward. The freehold property is divided into:
- units (flats); and
- common areas.
This allows an individual (a “unit holder”) to own the freehold of their flat. The freehold ownership of the common areas such as the actual structure of the building, corridors, stairs, entrance hall, and any garden or car park, is vested in a ‘commonhold association’, a company limited by guarantee. Membership of the commonhold association is limited to the unit holders, all of whom are entitled to membership. Unit holders each contribute a proportion of the cost of insuring the building and managing, maintaining and repairing the common areas.
Surprisingly, despite the fanfare that greeted its introduction almost 20 years ago, commonhold has struggled to gain any real traction at all, with fewer than 20 schemes and only around 150 commonhold units ever registered.
The launch of the new Commonhold Council follows an announcement in the Queen’s Speech which signalled the government’s intention to reform and modernise the housing system. Commonhold gives homeowners more freedom over decision-making than leasehold, and ultimately, they are in control of their building.
Charles Roe, director of mortgages at UK Finance, said that work to reinvigorate commonhold as an attractive alternative to leasehold ownership of property should focus on newbuild homes in order to address the concerns of mortgage lenders. He told a Westminster Legal Policy Forum that while there are a number of lenders who are prepared to lend on commonhold properties “it’s not as common as leasehold and that’s a problem…As a country we know and understand leasehold – both its flaws and positives. It will need government intervention and widespread support to ensure commonhold replaces leasehold [successfully].”
To discuss a commonhold scheme, or commonhold conveyancing, please contact our commonhold solicitors on 01225 462871. Alternatively, you can email them or complete the Contact Form at the foot of this page.