Leasehold v commonhold

Many people living in leasehold flats may be forgiven for feeling under attack. If they are in a tall building, it might be difficult to sell their property if it is cladded, but across many blocks of flats of whatever height, service charges are going up and ownership of leasehold flats seems to be riskier.

The government has said:

'For far too many leaseholders, the reality of home ownership has fallen woefully short of the dream – their lives marked by an intermittent, if not constant, struggle with punitive and escalating ground rents; unjustified permissions and administration fees; unreasonable or extortionate charges; and onerous conditions imposed with little or no consultation. This is not what home ownership should entail.'

There are many proposed leasehold reforms, one of the most radical being to phase in a new ownership format called 'commonhold.' Over time, the government wants this to become the default form of ownership structure for blocks of flats; they say:

'Commonhold will have its challenges. The flat owners will be responsible for managing their own blocks – the government says that this will give greater control to those in the block. This is true, but it also means responsibility for sourcing insurance, quotations for repairs, decent managing agents and fire risk assessments, to name but a few.

'At the heart of the commonhold model is a simple principle: the people who should own buildings, and who should exercise control over their management, shared facilities and related costs, are not third-party landlords but the people who live in flats within them and have a direct stake in their upkeep.

'In enabling flats to be owned on a freehold basis, commonhold ensures that the interests of homeowners are preserved in perpetuity rather than their value depreciating over time as it does under leasehold, and it transfers decision making powers to homeowners so they have a greater say over how their home is managed and the bills they pay, as well as flexibility to respond to the changing needs of their building and its residents.'

There is no easy answer – but if a flat owner is thinking of selling their property, they should get specialist legal advice at the outset. The solicitor will be able to identify possible problems and advise on how best to proceed.

It is fair to say that, even if introduced, commonhold will not be a quick fix. Those in existing leasehold flats will still be facing the current challenges for some time to come. It is also worth remembering that commonhold was introduced back in 2004 – but it did not take off, so the government has got a lot of work to do with homeowners, lenders and the lawyers who advise them if it wants to make a success of it this time around.

To discuss this or any other property matter, contact us.