Is commonhold really the key to flat owners' issues?

The new Commonhold Council held its first meeting last month. In 2018 The Law Commission proposed reforms that could be used to develop commonhold as an alternative to leasehold ownership. The new advisory panel will be looking those recommendations to see if they can make them work in practice - and whether or not commonhold could be a better, fairer form of property ownership.

The Council comprises leasehold groups and industry experts and is chaired by Building Safety Minister Lord Greenhalgh. Members include the BPF, the Building Society Association, FoPRA, the Law Society and the Leasehold Knowledge Partnership among others. A technical support group has also been established “to offer practical, legal and analytical expertise” to the Council. Commonhold means flats can be owned freehold, like houses, but with residents all becoming members of a company which owns and manages the shared areas and the structure of the building. The upside is that residents have more of a say over the way their building is managed. They can get more involved in the way that shared facilities are used and operated and – probably most appealing of all - there are no hidden costs or charges. Commonhold is widely used in plenty of countries around the world. It provides a tried and tested structure for homeowners to collectively own the building their flat is in, so why don't we just do it here? The reality is that there is a downside, and it’s a significant one.

Greater collective responsibility brings with it questions around commonhold company structures, their financial arrangements and liabilities, and getting buy-in from other residents for maintenance and other types of expenditure can be a far-from-easy task. If commonhold does take off here, it is likely that some groups of residents will see the value in continuing to use a professional management company to operate their blocks. However, it is inevitable that others will look at their building and think “how hard can it be?” The answer, unless you live in a very small block, is “harder than it looks” (and more expensive!) but it may take people a while – and they may have to get a few disasters under their belts – before they realise that. The worst case scenario is that blocks will fall into disrepair while residents argue amongst themselves over how and when money should be spent. Eventually a professional manager may be appointed to pick up the pieces but not before the buildings in question have become devalued in the process.

The Government seems to regard commonhold as a panacea for disgruntled homeowners let down by the leasehold system. In fact it comes with a whole new set of problems of its own. So it will be interesting to see what conclusions the Commonhold Council comes to in the next few months. None of those involved has any vested interest in promoting commonhold over leasehold – they simply represent a cross-section of stakeholders. We will be keeping a close eye on the way they are thinking.