The Council of Mortgage Lenders (CML) has issued further guidance for lenders in respect of commonhold, which came into force on 27 September 2004.
The guidance will be incorporated into the Lenders’ Handbook for England and Wales, in a move aimed at providing greater protection to lenders in the event of the voluntary winding up of a commonhold.
The new clauses provide – in addition to administrative matters such as checking insurance arrangements, arrears of commonhold assessment and restrictions on use – that an undertaking from unit holders to repay any mortgage secured on their unit on termination of the commonhold must be written into the commonhold community statement. It is, however, open to individual lenders to decide whether they are prepared to lend on the security of a commonhold.
Take-up of commonhold has been slow since its implementation, in part owing to the ambiguity of the termination provisions and the reluctance of lenders to lend against commonholds until adequate protection has been provided. As Katharine Fenn, professional support lawyer at Denton Wilde Sapte, highlights: “As the CML had issued no guidance to lenders on what to look for in a commonhold, the general view was that commonhold was not marketable. Developers were therefore not prepared to build commonhold units as they might be difficult to sell. Hopefully, now that the CML has given some guidance, commonhold may become a more attractive proposition.”
The new guidelines will be available on 6 May 2005 on the CML website: www.cml.org.uk/handbook.
References: EGi Legal News 21/04/05
