Law Commission Confident Commonhold Ownership Could End Leasehold Disputes
Earlier this week the Law Commission released its long-awaited perspective on alternatives to leasehold ownership. The Consultation Paper on Commonhold reform ‘Reinvigorating Commonhold: the alternative to leasehold membership’ will hope that it can spark new demand for a scheme that struggled when it was first introduced in 2002 and came into force in 2004.
Commonhold property is viewed as providing the leasehold owner with additional powers. This form of ownership allows a person to own a freehold property. The freeholder will also become a shared owner in the shared areas – in a flat, this will mean the common areas and corridors as well as the structure of the building.
This would then mean that service charges applied to the building’s owner, will be replaced with a democratic contribution agreed by all Commonhold owners.
Blamed for being too insular and failing to be used on larger developments, many lenders are also reluctant to offer mortgages because of the niche nature and increased likelihood of legal disputes with other Commonhold members.
The Law Commission believe that there is scope for current leasehold properties to convert into Commonhold. Additionally, this could expand from residential into larger commercial mixed-use developments.
The proposals also look to integrate shared ownership leases and other affordable housing under the remit of Commonhold ownership.
Professor Nick Hopkins, law commissioner, said: “Commonhold provides a once in a generation opportunity to rethink how we own property in England and Wales and offers homeowners an alternative system to leasehold. It involves a culture change, moving away from an ‘us and them’ mindset, towards ‘us and ourselves.’”
Mark Chick, ALEP Director and Committee member, said: “ALEP welcomes the latest round of consultations concerning Commonhold. The topic was widely debated by our members earlier this year and Commonhold reform is crucial not only to the leasehold sector, but the wider property sector and will have implications for us all.
“This is a consultation not to be missed and ALEP encourages all members to respond by the deadline in March 2019.”
Although Commonhold has been on the statute books sine 2004, when the Commonhold and Leasehold Reform Act 2002 came into force, it is proposed that these changes may become the viable solution to help resolve the leasehold crisis that is developing in the UK.
Will this system help prevent future leasehold issues in the future? Are there more issues that could arise under a Commonhold ownership?