Do You Know What Commonhold Is? If You Don’t, You’re Not Alone

Fewer than 20 commonhold developments have been created since the Commonhold and Leasehold Reform Act 2002 came into force in 2004. Unlike leasehold, Commonhold allows a person to own a freehold unit (their flat) outright and at the same time become a member of the company that manages the communal areas and buildings. There is no tenants'>landlord, no leasehold-dynamics'>ground rents, and no time-limited, depreciating asset. This sounds like a significant improvement on the complex and tricky-to-navigate leasehold system, so why has Commonhold proved so unpopular?

Why the 2002 Act Needs Reform: Addressing Commonhold’s Flaws and the Push for Change

Earlier this year, when asked for comment on Commonhold, Peter Haler, a former CEO of LEASE, explained that the 2002 Act was severely conceived from the start. "It was so badly done it makes the Dangerous Dogs Act look like English literature," he said. Peter believes the Act as it exists today is not fit for purpose and is not fixable: proper reform is needed. The government agrees. As a result, the Law Commission has been tasked with proposing reforms to revitalize Commonhold as a workable alternative to leasehold for both existing and new homes and is now trying to find out which aspects of the law of Commonhold have made it so unpopular.

Revitalizing Commonhold: New Proposals to Enhance Homeowner Control and Property Sector Appeal

A Call for Evidence, published in February, highlighted some issues with Commonhold as it stands, which need to be more attractive to homeowners and the property sector as a whole. Following up on this, a consultation paper titled: Reinvigorating Commonhold: The Alternative to Leasehold Ownership has now been published. It sets out a range of proposals aimed at making Commonhold work better. These include:

• Enabling Commonholds to be used for larger, mixed-use developments that 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 existing leaseholders to convert to Commonhold and gain greater control over their properties.
• Improving mortgage lenders' confidence, which is expected to increase the choice of financing available for homebuyers.
• Providing homeowners with a more significant say in how the costs of running their Commonhold are met.
• Enabling homeowners to end unattractive long-term contracts imposed by developers.

The Consultation Process: How You Can Get Involved

To read the proposals in full, go to https://consult.justice.gov.uk/law-commission/commonhold/. If you feel strongly about the issues raised, you can respond using the online form. The consultation period is open until 10 March 2019, and the Law Commission expects to publish its final report during the year.

Potential Impact of Reform: What This Means for the Future of Commonhold Ownership

If these reforms go ahead, Commonhold could become a more attractive and viable option for homeowners, providing them with greater control over their properties and reducing the challenges associated with traditional leasehold ownership. It could also attract a wider audience, including developers looking to offer more flexible property ownership structures.

Challenges and Opportunities for Commonhold: Will it Gain Popularity?

Despite the proposed changes, the success of Commonhold still faces hurdles. The system’s popularity depends on widespread adoption and trust among developers, lenders, and homeowners. The reforms aim to address these challenges, but whether they will make Commonhold a mainstream option remains to be seen.