Commonhold should be common practice
Much has been written about our recently issued response to the DCLG’s consultation on leasehold reform and the fact we are calling for the Government, as our recent press release put it, ‘to review commonhold and its existing usage as a system of freehold tenure for multi-occupancy buildings, with a view to replacing leasehold with a working commonhold proposition’.
This may have caused some surprise amongst industry stakeholders and I suspect much of this is down to the lack of commonhold in the market and, dare I say it, a lack of understanding about what commonhold actually entails. We did anticipate this – indeed one headline probably summed it up nicely, ‘Conveyancers call for revival of little-used alternative to leasehold’.
Now, ‘revival’ might be too strong a word because commonhold is used across the country, albeit sparingly, and it will probably not surprise you to learn that there are only 175 commonholders in England. However, we have surveyed them, and there is an overwhelming degree of positivity about commonhold – for instance, the vast majority are either happy or delighted with the arrangement and the amount they have to pay to the Commonhold Association. Also, when it comes to disputes, the vast majority (just under 80%) had never had any, while those that had were happy with the process to resolve it. A significant 85% would be happy to recommend commonhold to others, while of those who have also owned a leasehold property, the vast majority believe commonhold is a better option.
All well and good you might think, but some have pointed out potential issues with commonhold and I believe it’s only right to cover these and to perhaps put minds at ease about what they are.
So, at a recent APPG Commonhold Academics meeting attended by academics from Bristol and Oxford Universities, Tanfield Chambers, the BSA, the British Property Federation and the Leasehold Knowledge Partnership, we decided to come up with all the problems with commonhold, and (despite our best efforts) we only uncovered a handful of ‘technical’ issues, none of which have been confirmed in practicality by the survey responses we received. However, to give full transparency to the issue, those academic issues were:
- The fact that if you had commonholders responsible for different percentages of the maintenance charge for different common parts of a property, for example, where they had an equal share in maintaining the garden but some units had different numbers of parking spaces allocated so should pay a different percentage, this could be argued as not possible within the Commonhold Regulations. This however could be solved by adding an ‘s’ to the word ‘percentage’ in the regulations.
- Because the Commonhold Association owns the Freehold to the estate, if the Association went bust the freehold would be taken by the creditors. Because the units are freehold within a commonhold scheme arguably the unit owners would have no right to the land on which their property stood. The regulations however could be amended to state that the freehold would automatically pass to the successor Association.
- The Commonhold Association has no chargeable assets so if a unit holder refuses to pay then they have no way of raising funds to tide them over. The regulations could be amended to create a right of possession where unit holders do not pay their contribution, so the Association could effectively recover money from non-payers through an interest in land which could be charged to avoid the insolvency of the Association. This would be better than forfeiture as the Civil Procedure Rules would apply so possession could only be granted where there was evidence that everything had been done to resolve the position.
- Because Commonhold does not permit long leases to be granted, the current shared ownership schemes would not work. These could instead be delivered through a co-ownership model where the commonholder would own as joint owner with the housing association and the declaration of trust would be the indicator of their share – this could be “stair-cased” in the same way as can be done now.
- Commonholders have to go to the County Court if they have a dispute with the Association but only after completing their dispute resolution process and redress scheme process if there is one. It is suggested that this should be changed to require all Commonhold Associations to be a member of an ADR scheme and make the First Tier Tribunal the court of choice.
And that’s it. As mentioned despite there being plenty of brain-power in the room, these were the only issues we could foresee, and as noted above, each one of them has a solution. I might even go as far as to say that compared to leasehold, commonhold is a cinch not forgetting of course that commonhold comes with none of the rampant profiteering or numerous attempts to abuse it that have been recently highlighted so starkly in the leasehold sector.
It is, of course, up to the Government to decide on this but from our perspective commonhold presents an alternative to leasehold that ticks all the boxes and, at the very least, should be carefully considered by those who are charged with taking this process forward.
Beth Rudolf is Director of Delivery at the Conveyancing Association