Property Ownership Reform – Commonhold Ownership At Last!

The idea of Commonhold ownership was first conceived in the late 1990’s and was applauded by many when the Commonhold and Leasehold Reform Act of 2002 set out exactly how it should work. However, 23 years later and I have only ever heard of two buildings (or estates) in the whole of the UK which are Commonhold owned.  Which is a surprise when you consider that, in principle, it is a much better system than Leasehold. We can only assume that Leasehold ownership was so ingrained into our private sector, corporate system that there was no appetite with British builders to proactively support flat owners.

So I was very surprised when the UK government announced reforms to transition from the traditional leasehold system to a commonhold model. This is extremely good news for flat owners and signifies a shift in home ownership in this country. 

So what have the Government proposed?

• Abolition of New Leasehold Flats: The government plans to ban the sale of new leasehold flats, establishing commonhold as the default tenure for newly built flats. This change seeks to eliminate issues associated with leasehold arrangements, such as escalating ground rents and limited control for homeowners. 

• Facilitating Conversion to Commonhold: To assist existing leaseholders in transitioning to commonhold, the government intends to simplify the conversion process. This includes reducing the required approval threshold from leaseholders and addressing challenges posed by minority leaseholders who may oppose conversion. 

• Strengthening Commonhold Governance: The reforms will introduce standardized rules and governance structures for commonhold associations. These measures aim to ensure effective management of shared areas and responsibilities within commonhold properties.

• Mandatory Reserve Funds: Commonhold associations will be required to establish reserve funds to cover significant expenses, such as major repairs. This requirement is intended to promote financial planning and protect homeowners from unexpected costs.

• Enhanced Protections for Developers and Lenders: The government aims to provide safeguards for developers and mortgage lenders to encourage the adoption of commonhold. These protections are crucial for the widespread implementation of the commonhold system.

When Will it Happen

As we found with the long-awaited Leasehold and Freehold Reform Act these things do not happen quickly.  A formal consultation on the proposed ban of new leasehold flats is scheduled for later this year so we should not expect any draft legislation in the form of, The Commonhold and Leasehold Reform Act, until 2027 and enactment in 2029 (going on past experience).