Commonhold
Commonhold - What is it?
The Commonhold system divides an entire mutli-unit building into freehold parcels. This is different from the leasehold system which is hierarchical in nature; there is a Freeholder who owns the building who grants leases, an inferior interest, to each unit holder. The lease is nothing more than a right to occupy, with the lease setting out the terms and conditions for that occupation.
In a Commonhold building, the communal areas are owned by the Commonhold Association, which is a limited company made up of each Commonhold unit-owner or ‘Commonholder’. The units are then separated into different freehold parcels, owned by each Commonholder. The unit is owned outright and there is no lease or equivalent document.
The lease in a leasehold system sets out the terms and conditions of the right to occupy, including payment of service charges in exchange for the Freeholder maintaining and repairing the building. In Commonhold, there is a single document called a ‘Commonhold Community Statement’ which sets out the relationship between each Commonholder and the Commonhold Association for the whole building. The Commonhold Community Statement will set out a description of each unit, what each Commonholder can or cannot do, and the finances for maintaining and repairing the building. Whilst the Commonhold Community Statement is a prescribed document, it does give the parties flexibility to personalise it and importantly to amend it with ease if needed. This is particularly important for example if the parties seek to modernise it to reflect current times, such as allowing installation of electric vehicle chargepoints.
Commonhold can be achieved either by developing it as Commonhold at the outset or by converting an existing leasehold building to Commonhold. Currently, converting to Commonhold is difficult, not least of all because it requires 100% participation from the Leaseholders and any lender; this can be difficult to achieve which in turn makes conversion to Commonhold practically difficult.
In addition, not all Leaseholders can convert, as it is necessary to buy the freehold first pursuant to Leaseholder rights set out in Leasehold Reform, Housing and Urban Development Act 1993. The 1993 Act sets out rigid qualifying criteria which must be satisfied before Leaseholders can apply to buy the freehold. Only those that buy the freehold can then go on to convert to Commonhold.
Commonhold has largely been unsuccessful since introduced in 2002. There are however some significant advantages to Commonhold over leasehold, which has prompted the Government to consider making Commonhold more accessible in future so that those living within their buildings can benefit from the Commonhold model.
The Government seeks to make Commonhold more achievable for Leaseholders in a number of ways such as:
- Potentially reducing the amount payable to buy the freehold initially with enfranchisement valuation reforms;
- Removing the requirement to pay the Freeholder’s costs for buying the freehold, making it more cost-effective for Leaseholders;
- Relaxing the qualifying criteria for buying the freehold, which will enable many more Leaseholders to now buy the freehold;
- Relaxing the conversion criteria to make Commonhold more achievable without the rigidity of requiring 100% participation; and
- Making Commonhold management better once acquired.
The current Commonhold reforms include:
- 17 July 2024: Confirmation of a draft Leasehold and Commonhold Bill, which will seek to make Commonhold work.
- 21 November 2024: Ministerial Statement from Matthew Pennycook, Minister of State for Housing and Planning, confirming that the “central focus of the Bill will be reinvigorating Commonhold”.
- 19 March 2025: Commonhold White Paper released setting out details of the Commonhold reforms. This includes proposals to overhaul the Commonhold conversion process, to make it easier for Leaseholders to convert.
- 04 July 2025: Ministerial Statement from Matthew Pennycook, Minister of State for Housing and Planning, confirming that they seek to “end the feudal leasehold system for good” as quickly as possible.
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