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 landlord 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.

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.

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ALEP was set up in 2007 in response to concerns raised by owners of leasehold properties who wanted reassurance that the people they were dealing with were reputable. Freeholders also require this reassurance.