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What is Commonhold?

Mark Chick, director of ALEP and a Partner at Bishop & Sewell LLP, comments on how it’ll change ownership for the owners and purchasers of leasehold properties.

On Monday 3 March, the government published a Commonhold White Paper and announced plans to bring the sale of new leasehold flats to an end. So what does this mean for the owners of leasehold properties, both now and over the next few years?

What is commonhold?
Commonhold is a form of property ownership in England and Wales that allows homeowners to own your individual flats or units while collectively managing shared areas, such as hallways and gardens and the main structure of your building. This is done through membership of a company called a ‘Commonhold Association.’

Commonhold is a type of freehold ownership under which you, as a flat owner, have two related interests - ownership of the flat itself and also membership of the Commonhold Association. You must have both interests in order to have a valid title. Commonhold was introduced by the Commonhold and Leasehold Reform Act 2002 as an alternative to leasehold.

Unlike leasehold, Commonhold has no time limit – as the owner, you hold your property indefinitely rather than for a set lease term. Each property owner automatically becomes a member of a Commonhold Association, which is responsible for managing and maintaining the structure of the building. Technically, this gives you more control over maintenance and costs-based decision-making as there is no external freeholder or landlord.

Despite its potential advantages, Commonhold has remained extremely rare to date, because of the way in which the current legislation has been drafted – the existing law envisaged only the simplest of cases and not the sort of multi-use developments that are commonplace in the 21st Century. In addition, there was no compulsion to make all new developments Commonhold. It is often said (correctly) that more books have been written about commonhold than there are actual commonhold developments.

However, the Labour government has reignited interest in commonhold, believing it to be a fairer and more transparent system of homeownership.

What are the pros and cons of commonhold? 

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