Mark Chick: What Is Commonhold?
Mark Chick is a leasehold reform specialist and a Partner at Bishop and Sewell LLP. He is a Director and committee member of the Association of Leasehold Enfranchisement Practitioners (ALEP) and regularly writes and lectures in this area. He is also author of the websites Leaseholdinfo.com and Leasehold Reform News.
So, what is Commonhold and what happened to it?
Commonhold, in principle sounds (and may well be) great. One of the main problems is that not many people know how great it is (or, is not), as there are only around half a dozen Commonhold developments around the country.
Essentially, Commonhold is the 2002 Act’s long-term solution to leasehold tenure for residential flats.
It is a new species of freehold land tenure that means that common ownership of horizontally severed properties is possible. Multiple units exist as part of a Commonhold structure and there is a ‘Commonhold’ company that owns the freehold to the common parts of the building. Every unit owner holds a right of membership in the company and there is a Commonhold Community Statement that effectively sets down the extent of the legal rights and obligations between all the unit owners.
Sounds like heaven? Well, perhaps, or certainly some parts of the new world where ‘share block’ and similar ‘strata title’ structures exist and certainly Commonhold seems to have been modelled on these.
The problem for existing flat owners is two-fold. Firstly, as it is an untried (and relatively un-tested) mode of land tenure, there are few people who can advise on it. There almost certainly would be conveyancing issues to start with in relation to commonhold units as advisors will be unfamiliar with the issues arising from the transfer and mortgaging of such a unit. No doubt in time these would be overcome.
However, the most major barrier to flat owners with existing leasehold titles converting to Commonhold is that to do so requires a unanimous vote on the part of the current leasehold and freehold owners.
Clearly, it is something that could perhaps be contemplated after a freehold purchase where all the flat owners have taken part. However, with the existing leases in place and the possibility of extending these to 999 years and eliminating any ground rent relatively easily, there is not much appetite for a more cumbersome (and almost certainly expensive) conversion to Commonhold.
Commonhold is therefore currently effectively confined to new developments.
Builders of new developments and the banks and investors that fund them are very familiar with the leasehold system. As such, there is no or very little incentive for them to use any alternative. The buying public are also perhaps not as likely to be assured by a ‘new’ type of freehold land with which no-one is very familiar and hence the current system, for the moment at least, remains.
For advice on this and other leasehold issues please contact Bishop & Sewell LLP on:
Tel: +44 (0)20 7631 4141
email: [email protected]