Despite its current limited uptake to date, there is now hope for commonhold in the UK.
The UK government has recognized the need for leasehold reform, and there have been calls for greater use of commonhold as an alternative to leasehold. The recent consultation on leasehold reform, as part of efforts to tackle issues such as excessive ground rents and unfair leasehold practices, has brought commonhold firmly back into the spotlight.
The government has recently published a new white paper Commonhold White Paper: The proposed new commonhold model for homeownership in England and Wales – GOV.UK, which sets out its intention to make freehold ownership within a commonhold tenure the default structure for shared residential flats and mixed-use blocks going forward.
What is Commonhold?
Commonhold is set out under the Commonhold and Leasehold Reform Act 2002, but despite its introduction, it has yet to take off significantly – there are understood to be only 29 registered commonholds in total in the UK currently. [1]
The commonhold structure allows for more democratic control by homeowners, as individual owners of a building or development each own their unit (typically a flat or apartment) outright and hold a share in the management of the entire building. The responsibility for maintenance, insurance, and management of the communal areas is held by a commonhold association that is set up by the owners with each owner then having a say in the decision-making process.
Key Features and Benefits of Commonhold
| KEY FEATURES | BENEFITS |
| Under commonhold, owners hold a freehold interest in their individual units and a shared interest in the communal areas. This eliminates the need for a lease and gives each owner more autonomy over their property. | Commonhold removes many of the issues that have long plagued leasehold ownership. These include rising punitive ground rents, the potential for the lease to term to expire, and the control held by a distant freeholder. Commonhold ensures that homeowners remain in control of their property, and it provides a clearer path to resolving disputes. |
| In commonhold, the ownership of the unit is permanent, as there is no leasehold term granted that can expire. This offers greater security of tenure, unlike in leasehold arrangements, where the lease term reduces over time and the property may become less valuable and less attractive to lenders and investors. | As commonhold does not rely on a lease that will eventually expire, it offers long-term stability for homeowners. There is no need to worry about a lease term running out and the associated costs of extending the lease. |
| Maintenance of the building and communal areas are managed by a commonhold association. The association is responsible for ensuring the building is well maintained and for making decisions on issues that affect the building as a whole, such as repairs, insurance and improvements. | Commonhold provides a more democratic and transparent way of managing shared buildings. Homeowners have a greater say in how the property is maintained, how costs are shared, and how decisions are made. |
So What Are The Barriers?
While the advantages of commonhold are clear, it faces several significant barriers to widespread adoption in the UK:
Limited Awareness: Many potential homeowners and developers are simply unaware and/or unfamiliar with commonhold as an option. The majority of new builds and property developments continue to use leasehold as the default structure, which means commonhold has not been given the attention it deserves.
Legal and Structural Hurdles: Although commonhold is legally available, it is often seen as more complicated to set up compared to the established process of traditional leasehold ownership. The process of forming a commonhold association, agreeing on management arrangements, and ensuring that all owners are on the same page can be time-consuming and difficult.
Developer Reluctance: Developers may be hesitant to adopt commonhold because it removes their ability to retain control over the property through freehold ownership. In a leasehold system, developers often benefit from long-term ground rents or selling the freehold to an investor. Commonhold removes this opportunity, which may deter developers from embracing the model.
Financial and Administrative Responsibility: While commonhold empowers homeowners, it also places the responsibility for managing the property on the owners themselves. This can be daunting for some, especially first-time buyers who may not have experience in managing a building or navigating communal decision-making.
It should be noted that it isn’t possible to transfer directly from an existing leasehold to a commonhold structure because of the legal complexity, need for unanimous consent, likely resistance from stakeholders (especially freeholders) and a lack of structural support in the current legislation.
Reforms
To achieve commonhold as the default tenure in England and Wales for new housing and mixed-use developments, in addition to announcing a proposed ban on long leases of flats, the Governments white paper sets out how the existing commonhold model will be reformed (for the most part) in line with the Law Commission’s recommendations. Draft legislation is to be published, under the title “The Leasehold and Commonhold Reform Bill”, later this year.
There will clearly be technical, legal and practical challenges to overcome and in particular the Government acknowledges that they want to improve the process for converting an existing leasehold property to commonhold, and how and when to implement a ban on new leasehold structures.
Conclusion
Commonhold represents a promising solution to the longstanding challenges faced by leaseholders in the UK, offering a system where owners have full control of their properties and the communal areas. Despite its potential, commonhold has struggled to gain widespread adoption due to a combination of lack of awareness, legal complexity, and reluctance from developers.
However, with ongoing reforms and a growing desire for better property ownership systems, commonhold may yet find its place as the only option for shared residential flat and mixed-use block owners before the end of the current parliament.
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Disclaimer
The contents of this blog or any other published by Talbots Law cannot be considered as legal advice. You should take no action without prior consultation with a qualified solicitor or legal professional.