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Commonhold: Dead duck or ugly duckling?

Tasked with reinvigorating commonhold, the Law Commission has published a consultation on its proposals to make commonhold a workable alternative to leasehold, for both existing and new homes.

Dead duck?

As previously blogged, commonhold was introduced in 2002 and was heralded as a new form of property ownership that would address the difficulties faced by leaseholders and other landowners. Similar systems have operated successfully in a number of other countries including Australia and the USA. However, the take up rates in England and Wales have been low. There are currently only 20 commonhold developments in England and Wales.

Commonhold allows an individual to own a freehold “unit”, such as a unit on an industrial estate or a residential flat. Property ownership can be divided vertically or horizontally. Each unit holder is a member of the Commonhold Association (CA), a limited company, which owns and manages the common parts. The CA determines the financial contribution to be paid by each unit holder for the management of those common parts.

Despite the potential benefits, there has been a low take up of commonhold. Developers and lenders remain sceptical as to its adequacy as security and are unwilling to take the risk on untested structures and procedures.

Ugly Duckling?

One of the aims of the consultation is to improve lender confidence in commonhold and highlight its benefits over leasehold ownership. Other proposals include:

  • Enabling commonhold to be used for larger mixed-use developments which accommodate not only residential properties but also shops, restaurants and leisure facilities.
  • Allowing shared ownership leases and other forms of affordable housing to be included within commonhold.
  • Making it easier for leasehold owners to convert to commonhold.
  • Providing homeowners with a greater say in how the costs of running their commonhold are met.
  • Enabling homeowners to end certain long-term contracts imposed by developers.

Whether the proposals do enough to reinvigorate commonhold remains to be seen. If not, this consultation must surely be its swan song.

The deadline for responses is 10 March 2019. A copy of the consultation can be found here.