Commonhold property

Unlike leasehold properties, commonhold properties have no overall landlord. Instead, they are owned jointly by the owners of each property or unit in the building.

Only a freehold building or piece of land can become a commonhold. The building or land must be registered as a commonhold with the Land Registry.[1]

A commonhold property is divided into units and common parts. A unit is usually an individual flat, and can also include areas such as a garage or a parking space. The owner of each unit owns the freehold of that unit. All other parts of the building, such as the stairs and entrance foyer, are the common parts.

The freehold of the common parts is owned by a limited company called a Commonhold Association, and the owner of each property in the building is automatically a member of this association.

The Commonhold Association is responsible for the upkeep and repair of the common parts in the building. All members must sign a statement called a Commonhold Agreement or Commonhold Community Statement, agreeing to keep to certain terms and conditions. These are similar to those usually found in a lease, for example to agree not to cause a nuisance to other residents.

The Commonhold Association also decides on the commonhold assessment.[2]

This is the amount of money needed to run the commonhold, for example for cleaning and for building insurance, and also for the cost of repairs and improvements. It may also be used to provide a reserve or 'sinking' fund to cover major repairs.[3] The commonhold assessment is similar to service charges for leasehold property. Each occupier must pay a percentage of the commonhold assessment to the Commonhold Association.

The Commonhold Association may also request an additional sum of money from occupiers to cover any emergency works.

As the commonhold units are owned on a freehold basis, possession action cannot be taken against occupiers for non-payment of their share of the commonhold assessment. The Commonhold Association would need to follow the civil debt-recovery procedure to recover any arrears.

Most commonhold properties are likely to be in new developments built after 27 September 2004.

After 2004, property developers could decide whether a new development is commonhold or leasehold. It is likely that there will not be many commonhold developments until the system has been in place for a while, because developers will want to make sure there are no major problems with the new system.

Advantages of commonhold property include the following:

• commonhold avoids the problem of the lease expiring

• as there is no overall landlord, all decisions about the building are made by the individual property owners

• commonhold avoids the problem of landlords who demand high service charges and/or fail to repair or maintain the building

• all owners of property in a commonhold building have equal rights

Disadvantages of commonhold property include the following:

• it is up to the members of the Commonhold Association to enforce the rules contained in the Commonhold Agreement/Community Statement. This could lead to tensions between members

• it can be expensive and complicated to convert a property to commonhold

• as it is a new type of ownership, there may be unforeseen problems with commonhold. Some issues may need to be tested in the courts

Existing leaseholders may be able to convert to commonhold.

Permission must first be gained from the freeholder, and all the property owners in the building must buy the freehold. Every property owner within the building must agree to convert to commonhold.[4]

The procedure for converting to commonhold is complex and can be very expensive. It is likely to be most suitable for people who live in large blocks of flats where there is also commercial property (such as offices).

Occupiers who live in a small block may find it easier and cheaper to simply buy the freehold.

Occupiers wishing to convert to commonhold should be signposted for expert help from a solicitor.

The Leasehold Advisory Service suggests a number of particular factors that buyers of a commonhold property should check before purchase, including if:

• the Commonhold Association is properly registered

• they are happy with all the terms in the Commonhold Agreement/Community Statement

• the previous owner has left any outstanding arrears, such as arrears of payments due towards the commonhold assessment

Contact the Leasehold Advisory Service (LEASE) for further information.