The Commonhold and Leasehold Reform Act Part I comes into effect on 27 September. Land law minister David Lammy looks at the benefits commonhold offers to property owners.
Flats, houses, offices, shops and industrial units in England and Wales that form part of a larger building or development are owned on long leases.
Owners of these units now have a new way to own their property: commonhold.
Commonhold allows flat owners and others to be freeholders and to take care of everyday concerns such as repair, insurance and anti-social behaviour, through their commonhold association.
Commonhold is voluntary. Both new or proposed buildings and existing developments can be registered as commonholds.
Extending housing choice was a manifesto commitment made by this Government in 2001, and I am pleased that people now have more choice at their disposal.
How can we define commonhold?
● A commonhold is a freehold property divided into individual properties, known as units, and common parts.
● The common parts and each unit are registered separately at Land Registry.
● Commonhold ownership combines private ownership with responsibilities to the commonhold community.
● Each unit will provide one member, with voting rights, of the commonhold association.
● The commonhold association is a limited company. It owns the common parts and is responsible for their repair, maintenance and insurance.
● The commonhold community comprises the individual freehold owners, known as unit-holders, their tenants and the commonhold association. There is no landlord.
● The rules of the community and the rights and responsibilities of its members will be defined in publicly available documents.
● Tenants can be bound by the rules of the commonhold community.
● Standard commonhold dispute resolution procedures must be followed.
What advantages does commonhold have over leasehold?
Freehold ownership is permanent, leasehold ownership is for a fixed period of time.
There will be one commonhold community statement for each commonhold. With leasehold, by contrast, each property requires its own lease.
Whilst allowing material specific to the commonhold in question to be added, the content of the commonhold community statement will be largely standardised and its format closely based on a template prescribed by legislation.
By comparison, every lease is a separately negotiated document with its own terms and format.
The statement will spell out obligations on repair and maintenance for unit-holders and the commonhold association. No part of the commonhold can be omitted.
Allocations of voting rights and communal expenditure will also be clearly specified. Defective drafting, so often a problem in leases, should therefore be far more unusual (and less significant) in commonhold than in leasehold properties.
Of course, even though the commonhold documents are based on a standard template and written in clear English, they are still documents that deal with property ownership and create legally enforceable rights and duties.
The problems that are inherent in any development where people share facilities and buildings of finite life will not disappear simply because a new legal structure is being adopted.
The difference is that commonhold will give property owners the opportunity to work together to develop the solutions that work best for them, without the involvement of a landlord.
Proper advice will be essential. My hope is that those involved in the property industry, whether as developers, lenders, property managers, surveyors, lawyers or otherwise, will approach the opportunity offered by commonhold positively.
If they do, I am confident that commonhold can make property ownership simpler and more understandable and thus contribute to the building of better communities in the future.
