The Law Commission has just published its three final reports detailing a "package of reforms to transform the future of home ownership in England and Wales". The reports cover enfranchisement, right to manage and commonhold, with the aim of transforming the residential sector.
Commonhold, which is popular in both the US and Australia, was introduced nearly 20 years but was a resounding flop. The aim now is very much to ensure that commonhold is the preferred alternative to leasehold as a way of owning homes in the UK, either in new developments or with existing leasehold interests being converted to commonhold. Leasehold has long been regarded as feudal in nature and there is a strong desire for reform, to free leaseholders from escalating ground rents and excessive service charges, as well as other landlord and tenant disputes.
In a commonhold development, there are no landlords and tenants. Each individual property owner owns the freehold to their flat, office or shop (and is responsible for its maintenance), while the freehold to the structure and shared parts is owned by a Commonhold Association which has responsibility for the repair of the structure and common parts. The unit owner then becomes a member of the Commonhold Association (a company limited by guarantee) which owns and manages the common parts of the block or estate and each unit owner contributes towards the expenses of the Commonhold Association. Each Commonhold Association has a Commonhold Community Statement which sets out the boundaries of the common parts and the rights and obligations of the unit owners and the Association. The Statement contains a number of prescribed terms which are determined by Government.
The proposed reforms focus on making it easier to convert to commonhold from leasehold and improving the management of commonhold ownership. However, there remain some hurdles, for example, the impact on leaseholders who do participate in a conversion to commonhold.
Commonhold whilst attractive in many respects (not least that it may speed up the conveyancing process) still needs a bit of tinkering before it is ready for a relaunch. Efforts have been made in the recommendations to ensure fairness but there is still scope for dispute between unit owners.
However, these proposals are important and could mark the start of significant change in UK property ownership.
"It is clear that the current leasehold system often fails resident leaseholders" Julie James MS, Minister for Housing and Local Government, Welsh Government: