Commonhold has been introduced recently as an alternative form of property ownership and tenure to the existing leasehold and freehold. The legislation has been introduced to allow tenants to seek an alternative to lease holding to avoid the current problems of being a lease holder:

• Holders of long leases suffer a problem of diminishing value of the lease and this gives them problems with obtaining finance
• Long lease holders have to pay an annual ground rent and there have been cases in the past where greedy landlords have massively increased the ground rent.
• Some unscrupulous landlords may neglect their maintenance responsibilities and try to save costs in other areas to the detriment of tenants
• Although there is a right to buy the freehold on long leases, landlords can easily block or obstruct the process

A Commonhold is created out of a freehold building. Each tenant jointly owns a share of the freehold. Each share of the freehold is termed a commonhold unit. The tenants jointly deal with the management and maintenance of the building. Usually a limited company is setup with each tenant being a shareholder. This company is then used as a vehicle by which tenants jointly manage the property.

Commonhold ownership is very new in the UK and it is too early to say what the effect will be on the residential housing market in the UK. Our view is that it will not completely replace the existing leasehold and freehold for flat ownership where it is expected to be most commonly used. Converting the current leaseholds into commonhold is not straightforward. Commonhold's are most likely to be established on newly built blocks of flats. We foresee that not all tenants would favor having a direct part to play in the management aspects of a property - which requires a certain amount of specialist skills and knowledge. The temporary nature of living in a flat will introduce problems with long term maintenance issues like replacing a roof. If a tenant intends to stay in a flat for a very short time he would be reluctant to pay his equal share in renewing a roof, for instance, which would benefit the long term tenants for a very long time.

Further Information

Leasehold Advisory Service: Commonhold - An Introduction

Land Registry: Commonhold

Copies of the Commonhold and Leasehold Reform Act 2002 (ISBN 0105415022) can be obtained from The Stationery Office Limited (TSO). e-mail: customer.services@tso.co.uk or telephone 0870 600 5522. Alternatively, click on this link to order online at the TSO: TSO Bookstore: Commonhold and Leasehold Reform Act 2002

News and Views

The Move Channel: Legal Viewpoint: Will Commonhold become Commonplace?

Joseph Rowntree Foundation: Managing individual home-ownership within multi-owned property

The Move Channel: Commonhold Comes Into Force

icTeeside.co.uk: Third Route to Ownership

BBC News: Property Laws Shaken Up