Commonhold in 2025

The landscape of property ownership in England and Wales is undergoing significant shifts, with commonhold emerging as a pivotal alternative to traditional leasehold structures. This guide aims to provide a detailed explanation of commonhold, its key features, and its implications, particularly in light of recent legislative changes.

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What is commonhold property?

Commonhold is a form of freehold ownership designed specifically for multi-occupied buildings, such as flats. Unlike leasehold, where ownership is granted for a fixed term, commonhold provides indefinite ownership of a unit within a shared building.

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key points:

• It allows individuals to own their flat outright rather then for a set amount of time, as is the case with a lease

• The Commonhold Association owns and manages the shared areas of the building, such as hallways, gardens, and structural elements.

• Unit owners (flat owners) are automatically members of the Commonhold Association, giving them a direct say in the management of their building. There are no third party investors as is the case with the freehold/leasehold relationship.

• The Commonhold Community Statement (CCS) will mostly be in a standard format and acts as a rulebook, outlining the rights and responsibilities of unit owners.  Overtime, the public will become familiar with the standard procedures under a typical CCS as opposed to leases which differ substantially from building to building.

• No ground rent is payable.

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The commonhold association

• This is a company that all of the unit owners belong to, much in the same was as a freehold residents management company.

• The association is responsible for maintenance and insurance of the common parts of the building.

• This means that the people that live in the building, are the people that control the building in terms of how much is spent on maintenance and when, which projects are prioritised and how major works are planned and paid for. This is a significant move away from the top down style of management by third party freeholders who often present leaseholders with huge service charge bills with little warning.

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Commonhold vs. share of freehold

It's crucial to distinguish between commonhold and "share of freehold," as they are often confused:

• Share of Freehold:

  • This typically involves leaseholders collectively purchasing the freehold of their building through collective enfranchisement or the tenants right of first refusal.

  • While it grants greater control over the building's management, individual units remain leasehold in order to preserve the covenants and obligations in terms of use of the flat and payment of the service charge to maintain communal parts of the building.

  • Therefore, leases still have a finite term, and it is common for co-freeholders to have a share of freehold lease extension to 999 years, to keep the legal structure in place but have a flat that is 'as good as freehold'

• Commonhold:

  • Completely eliminates leasehold, providing ownership of individual units (flats) forever rather than for a fixed term.

  • It offers a more secure and long-term form of ownership, without the concerns of lease expiry or the expense of a lease extension (even the much lower cost share of freehold lease extension).

  • Commonhold is a legal framework. However share of freehold is a way that leaseholders can gain more control whilst keeping leasehold law in place to deal with disagreements should any arise between place owners.

A share of freehold is the best version of leasehold, whereas commonhold replaces the lease entirely.

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What does commonhold mean?

The driving principle is that commonhold signifies a shift towards greater homeowner autonomy and control, using a much more common form of homeownership when looking at legal systems around the world. It means:

• Direct control:

  • Unit owners have a direct say in the management and maintenance of their building through the Commonhold Association, which will mostly be governed by standard rules that will apply to associations across the country.

  • This eliminates the reliance on external freeholders and managing agents, fostering a sense of community ownership.

• Long-term security:

  • Commonhold unit ownership provides indefinite tenure, removing the anxieties associated with lease expiry and lease extensions.

  • This offers greater stability and security for homeowners by the removal of third party interests that typical invest in leasehold apartment buildings in order to see a return, rather than manage it in the interests of the people who live there.

• Transparency and democracy:

  • The Commonhold Community Statement ensures clear and transparent rules for all unit owners.

  • Decisions are made collectively, promoting a democratic approach to building management.

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The Leasehold and Freehold Reform Act 2024 and commonhold

The Leasehold and Freehold Reform Act 2024 along with the commonhold white paper, represent a significant step towards reforming property ownership for flat owners. These two developments combine to:

• Put forward a complete replacement for the much maligned leasehold system:

  • The government is actively promoting commonhold as a preferred alternative to leasehold, aiming to increase its adoption.

  • The aim is to make commonhold the default for new build flats.

• Improving on the former unsuccessful attempt at commonhold from 2002:

  • The government will be consulting on how to simplify the legal and administrative processes associated with establishing and managing commonholds and look at why it was previously not taken up when it first joined the statute books in 2002 (which was widely attributed to mortgage companies being cold on the idea of lending against a commonhold unit due to the potential for commonhold associations to become insolvent, leading to buildings falling into disrepair).

  • This aims to make commonhold a more accessible and attractive option for developers and homeowners.

• Future of leasehold:

  • The government has expressed intentions to phase out leasehold for new-build flats. This will increase the importance of commonhold however given that there are between 4 and 5 million leasehold flats in England and Wales, leasehold will be around for a long time until all of those existing buildings convert to commonhold.

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Commonhold and leasehold flats in Brighton

In areas like Brighton, where housing density lends itself to lots of flats, commonhold presents a compelling alternative for many that are wary of high service charges, a lack of input on building tendering and other problems associated with third parties managing a building rather than the residents.

Addressing leasehold issues:

• Brighton's many Victorian era buildings often suffer from issues related to short leases and escalating ground rents.

• Commonhold can provide a solution to these problems, offering long-term security and control to flat owners.

Community management:

• Brighton's strong sense of community aligns well with the principles of commonhold, where residents collectively manage their buildings.

• This can lead to better maintained buildings, and more harmonious living environments.

Property value:

• In the long term, commonhold properties may become more desirable than leasehold properties, increasing property values.

• there is however understandable fear that initially, commonhold units will be too baffling for buyers, who may opt for the tried and tested share of freehold/leasehold combination.

• There is also fear from flat owners that their leasehold properties may fall behind commonhold units in a multi tier flat market created by the law reforms

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Criticisms of commonhold

While commonhold is designed with flat owners at heart, it's essential to acknowledge potential challenges:

Collective decision-making:

• Effective management of a Commonhold Association requires active participation and cooperation from all unit owners.

• Disagreements and conflicts can arise, requiring robust dispute resolution mechanisms, which will need to form part of the revived legislation for this plan to be effective.

Financial responsibility:

• Unit owners are collectively responsible for the maintenance and upkeep of the building, which can involve significant financial commitments i.e. this does not mean there will be no service charge once leasehold is replaced; the building still needs to be maintained.

• Proper financial planning and reserve funds are crucial and residents will likely still want a professional property manager to manage the accounts and have a comprehensive management plan for long term profects like roof works and shorter term such as weekly cleaning of common parts.

Transitioning to commonhold:

• Converting existing leasehold buildings to commonhold can be complex and currently requires unanimous consent.

• Although the government is trying to make this process easier.

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In conclusion, commonhold represents a significant evolution in property ownership, offering greater control, security, and transparency for homeowners. As legislation continues to evolve, commonhold is poised to play an increasingly important role in the future of residential property in England and Wales.