Commonhold was introduced by the Commonhold and Leasehold Reform Act 2002 and, in essence, is a new way (i.e. not freehold or leasehold) for flat owners to collectively hold the building containing their flats. It’s not proved very popular, with only c.20 developments across England and Wales. By s.62, CLRA 2002, the government is empowered to give financial support to people or organisations with a view to promoting commonhold. In practice, it has done this by funding LEASE (leasehold advisory service).
That funding has just been stopped.
In 1995 the Labour Government produced its policy document ‘An End to Feudalism’ which highlighted some of the genuine areas of concern with leasehold tenure and stressed the need for commonhold as a replacement for the leasehold system rather than working alongside it.
In 2001 the Commonhold and Leasehold Bill was introduced and C.A.R.L.(Campaign for the Abolution of Residential Leasehold)wanted it to include 5 things:
1. The introduction of Commonhold, which it got;
2. The abolition of residential leasehold, which it didn’t get;
3. The automatic right to transfer from leasehold to commonhold, which it didn’t get;
4. The transfer of tenure at a fair price, which was not covered by the Bill;
5. Special measures for people unable to transfer, which were not in the Bill.
The Liberal Democrats didn’t do much better because they didn’t get the abolition of marriage value, the abolition of forfeiture and any reduction of the 100% consent requirement for existing properties to convert to commonhold.
Commonhold was still considered important enough however to be placed onto the statute books in September 2004 as a mortgeable alternative to leasehold.
So what happened?
Absolutely nothing.
The very people Commonhold was supposed to benefit, i.e. the homebuying public, never stood a chance of determining it’s popularity, one way or the other.
Why?
I tend to think that Commonhold was resisted because too many vested interests didn’t want to lose their source of revenue from ground rents, premiums from lease variations /extensions, freehold sales, licences to alter, sublet etc.
There were no conversions from leasehold to commonhold because it not only required 100% agreement of all leaseholders it also included any mortgagees, the freeholder and any other other interested parties!
It was also felt that once leaseholders had collectively purchased their freehold and automatically granted themselves 999-year leases then the need for commonhold was pretty much eradicated.
The latter argument however works on the assumption that all leaseholders can afford to purchase their freeholds and want to manage their properties. It also works on the assumption that every block that wants to collectively enfranchise or self-manage will meet the prescribed criteria.
It also doesn’t eradicate the very real risk that problems with the tenure would likely continue because leasehold managing agents are entirely unregulated and the risk of getting a bad one is monumentally high.
Interestingly it was also noted that not all residents have the time or inclination to participate in the running of a commonhold development.
Contrast that with leasehold where its generally accepted that leaseholders will have the money, inclination and the time (sometime years) to resolve problematic third party management.
Leasehold is too lucrative for far too many people for commonhold to have ever been a serious third way of buying property and so is yet another manifesto housing promise that has failed to materialise under the last Government and stands even less of a chance of even sniffing daylight under this one.
Kind Regards
Miss Sharon Crossland AIRPM
Leasehold Life
Well, Commonhold isn’t perfect. There will be disputes regarding shared costs and, at least with leasehold, you have a well-established statutory scheme for resolving disputes (‘tho I accept that it isn’t perfect). With Commonhold, you’ll end up re-fighting the same cases that have been fought since the 1970s in service charge cases, just to establish what the rules are on shared costs.