Commonhold is the newest form of tenure in England and Wales, introduced around a decade or so again as a way of allowing those who share a property, such as in a block of flats, to have a collective interest in the land and property.
Most properties are freehold, where the land and property is owned by the same person or freeholder; or leasehold, where the property is owned for a specific period of time with the land on which it stands leased from the freeholder.
What is commonhold?
Commonhold was introduced in 2005 by the Commonhold and Leasehold Reform Act, but in that time only around 50 blocks of flats or apartments are held as commonhold and most of these are newbuilds where the developer has signed over the freehold to a commonhold association of flat owners.
Unlike with leasehold, where a property reverts to the ownership of the freeholder after the lease expires, those sold as commonhold are owned in perpetuity by the owner. And because the commonhold or residents’ association, which is legally established, owns and manages the freehold of the land, each flat or unit owner has a say in the costs and services required.
Common areas include external walls, roofs, hallways, landscaping and car parking areas.
Leasehold ban may swell commonhold numbers
While there are only a small number of commonhold properties across England and Wales, their numbers are sure to grow over the coming months and years after the Government announced a ban on developers and builders selling newbuild properties as leasehold.
This has been done to eradicate unfair practices that can see leaseholders hit with ever-increasing ground rent and maintenance charges. Until now there has been no financial incentive for a builder to sell a block of flats as commonhold – selling as leasehold guarantees an annual income for so long as the building remains occupied.
However, while commonhold properties may increase in popularity, currently the most popular way for flat owners to have more control over their property is to buy a share of the freehold.
A group of flat owners can get together to buy the freehold from the land, establishing an association to manage the property and its communal areas. This is done by a process known as Collective Enfranchisement, but at least half of owners must agree to buy the share of freehold for this to become a reality.
Legally, the land upon which the building stands is then freehold and each flat owner has a share of the freehold. Be warned – the flat itself will remain as leasehold and can only be bought and sold as such.
Buying a share of freehold
The advantage of buying a share of freehold is that the residents’ association can grant longer leases at a reduced cost and can also vary the terms of an existing lease. Meanwhile, the residents can also choose who provides their services, shopping around for the best deal to keep costs down.
There are, however, disadvantages because buying a share of freehold can often be complicated, expensive and lengthy. There may be disagreements between individual freeholders on certain decisions around the property. And lenders can sometimes be unwilling to lend on this type of tenure.
Fridaysmove works with legal specialists who are experts in buying and selling commonhold property and in converting from leasehold to commonhold. Call now for a no-obligation quote on 0800 038 6446 and find out how Fridaysmove can help with your commonhold conveyancing.