A review of property ownership tenures is being called for by the Conveyancing Association (CA).Forming part of its response to the leasehold reform consultation which closed last week, the Association is proposing that commonholds should replace leaseholds.
The introduction of the Commonhold and Leasehold Reform Act 2002 brought in the commonhold alternative initially, a structure which means all residents have a say in how the building is managed.
As there is no freehold, landlord or lease, the value of the property does not decline in line with the duration of the lease.
Whilst there are numerous benefits to the scheme, critics have highlighted the barriers to adoption, namely in the need for unanimity. In order for the change to take place, it must be approved by the developer, the freeholder, the lender as well as the residents if it is to be approved.
Commenting on the CA’s response to the consultation was Beth Rudolf. The Director of Delivery at the Conveyancing Association highlighted the misconceptions around commonhold and the need to acknowledge the part it could play as a viable alternative to leaseholds.
“Some refer to commonhold as a ‘failed tenure’ when in fact academics in a recent review could only come up with half a dozen technical flaws.
“The real reason commonhold is yet to take off is because of home builders and lenders.
“As was stated at the recent All Party Parliamentary Group for Leasehold Reform meeting, commonhold could only come in if there was a ban on creating value out of leasehold.
“Why would any builder, mindful of their profit line, choose to give up the asset value created by leasehold? Unless you are a business that specifically sets out to create affordable housing.”
Whilst the Association is predominantly advocating the commonhold scheme, Beth also acknowledged that the review may not be adopted.
“We are aware that the Government may not opt for this solution and, that being the case, we wanted to spell out the red lines that need to be drawn to ensure that no leaseholder is left in the situation that many people find themselves in, and which have hit the headlines in recent months.
“That means defining when leasehold can be used, minimum lease terms, peppercorn ground rents, reasonable fees, and access to a redress scheme.”
