Common hold is a system of property ownership in England and Wales. It involves the indefinite freehold tenure of part of a multi-occupancy building (typically a flat) with shared ownership of and responsibility for common areas and services.
Commonhold
Commonhold is where people own their homes without an expiring lease – this was introduced 14 years ago but has been little-used. The Law Commission wants commonhold to be more widely available in England and Wales and has been consulting on reforms.
Both the Government and the Law Commission are currently considering the responses from the UK property and legal industries to their parallel consultations on ‘unfair practices in the leasehold market’ and a decision from the Government is thought to be due very soon.
Leasehold
Under a leasehold, the person has the right to use the property, but they still have to get their landlord’s permission for any work or changes to their home. Typical complaints from leaseholders range from being over-charged by managing agents for repairs to common areas, such as roofs, or about punitive ground rents. It can also be expensive to extend a lease, and in some cases, leases have been sold on at inflated prices.
Four million people in England own leasehold properties. However, since the Commonhold Act came into force in 2004, only 20 commonhold developments have been created–including just one in London, and one in Manchester. The Law Commission says low take-up has been attributed to a range of reasons, including short comings in the law governing commonhold; mortgage lenders’ unwillingness to lend on such properties; a lack of awareness of the system; and existing financial incentives for developers to use leasehold.
The top and bottom is I believe commonhold tenure will eventually be seen as the prime value in apartments or even managed estates with houses. The Law Commission has determined leasehold as not a form of property ownership, it’s an extended period of tenancy.
Today’s preference for families still to own their home will see leasehold prices drop depending on the onerous terms or the better ones with a share in the freehold. There can’t be any justification for some of the terms of contract many leaseholders are now realising they have.
Having the opportunity to discuss and liaise with the Law Commission has helped as until I advised they were unaware Help to Buy wasn’t applicable for Commonhold but through the intervention of Sir Peter Bottomley in the House of Commons it was corrected within days. The secretariat to the All Party Political Group on Leasehold Reform has been a great supporter and are a brilliant source of information.
The questions are now being asked, as leasehold isn’t property ownership, will estate agents have to have “For Sale, For Lease and For Rent” signs. The Advertising Standards Authority is currently reviewing this. The solicitors are now being investigated as well. It’s been punted as the next PPI and the big builders are culpable.
This article was originally published in issue 34 of Property Professional, our exclusive members' magazine.
Property Professional magazine
Expect high profile interviews with leading industry figures, market intelligence information, legislation and regulation topics in our fantastic members' magazine.
