What’s the deal with commonhold flats?

The days of leasehold flats could be numbered if the current Government gets its way. While the proposed Leasehold and Commonhold Reform Bill - which would ban new build flats being created as leasehold properties - has been frequently written about, very few column inches have been given to its replacement: commonhold.

Cross over the border into Scotland and almost every flat is already commonhold. Leasehold flats are very few and far between as the country has pursued a ‘heritable interest’ (also known as ‘ownership’) path. This means those buying flats in Scotland almost always enjoy freehold status. Leasehold properties were almost all but stamped out in 2012 thanks to the Long Leases (Scotland) Act. This saw many ultra-long leases automatically convert to ‘heritable interest’  or ‘ownership’.

Scotland’s system has long been admired in England and Wales, with successive Governments pledging to end a leasehold system often described as feudal. ‘Fleecehold’ is another unflattering term for the grip freeholders have over the way blocks and apartment buildings are managed.

The alternative to leasehold is commonhold. It takes most of its cues from the Scottish system but it’s not a new concept in England and Wales. Properties could be offered on a commonhold basis as far back as 2002, when it was introduced via the Commonhold and Leasehold Reform Act.

It never really took off as a proposal, with the Government confirming only around 20 developments have been built as commonhold in the last 15 years. There has been pushback from mortgage lenders too. They have been hesitant to loan on commonhold flats due to a lack of guarantees regarding how the building would be managed and maintained. 

Housebuilders have also been reluctant to churn out commonhold developments as the sale of the land to create freeholders has been lucrative. Although ground rent for new longresidential leasehold properties in England and Wales was banned from 30th June 2022, under the Leasehold Reform (Ground Rent) Act, new developments with ground rent charges were created up until that date. Of course, freeholders can continue to charge ground rent at developments built before 30th June 2022.

Change is coming, however. The current Government’s Leasehold and Commonhold Reform Bill aims to make commonhold the standard flat tenure by 2029. March saw the publication of the Commonhold White Paper: The proposed new commonhold model for homeownership in England and Wales, while a draft Bill with more reform details is expected later in 2025.

So, what exactly is commonhold? If you buy a commonhold flat, the purchaser becomes a ‘unit owner’ and automatically becomes a member of the commonhold association. Instead of the freeholder owning the communal areas, the commonhold association does. 

A commonhold association is in charge of securing directors, organising insurance, seeing to repairs, protecting the asset and making necessary improvements. It is also responsible for setting the service charge, collecting the money and handling disputes. 

Areas under the commonhold association’s jurisdiction could include car parks, lifts, stairwells, shared facilities, fire and flood prevention measures, roofs, security systems and communal gardens. As a group, the commonhold association can undertake the communal area management themselves, or they can appoint a private company to do this on their behalf. 

The main benefit of commonhold is transparency. Many leaseholders have felt ripped off by third-party management companies, experiencing little to no control over how their service charge is spent. Commonhold allows unit owners to do their own research, shop around and spend the money how those living in the building see fit.

It is hoped the Leasehold and Commonhold Reform Bill will make it easier to work within a commonhold framework, taking note of recommendations from the Law Commission and working with mortgage lenders to make lending on commonhold properties more acceptable.

The Bill also seeks to make it easier for existing homeowners to convert their leaseholder status into commonhold, or mount a collective enfranchise movement. Both, if successful, will see the leaseholder become a freeholder.

If you would like any more details about the future of leasehold flat sales, or would like advice about your current tenure, contact us.