Commonhold Definition
Commonhold is a form of property ownership for multi-unit buildings (typically blocks of flats) where each owner holds a freehold interest in their own unit and collectively manages the common parts of the building through a "commonhold association."
Introduced by the Commonhold and Leasehold Reform Act 2002, commonhold was designed to replace the leasehold system for flats - a system widely criticised for giving too much power to freeholders and creating issues with ground rent, service charge disputes, and diminishing lease terms.
How Commonhold Works
- Each flat owner holds freehold title to their individual unit
- The common parts (hallways, roof, gardens, lifts) are owned and managed by the commonhold association
- Every unit owner is automatically a member of the commonhold association
- The association is a limited company governed by a "community statement" - a document that sets out the rights and obligations of each unit owner
- There is no lease, no ground rent, and no freeholder above the unit owners
- Decisions about maintenance, service charges and building management are made democratically by the unit owners
Commonhold vs Leasehold
| Aspect | Commonhold | Leasehold |
|---|---|---|
| Ownership type | Freehold of each unit | Time-limited lease |
| Ground rent | None | Payable (peppercorn for new leases) |
| Ownership expiry | Never | At end of lease term |
| Management | Democratic - owners vote | Typically by freeholder or their agent |
| Prevalence | Extremely rare (<20 developments) | Dominant (4.5 million homes) |
Why Commonhold Has Not Taken Off
Despite being available since 2004, commonhold has been adopted in fewer than 20 developments across England and Wales. The main barriers include:
- Developer resistance: Developers lose ground rent income streams worth thousands of pounds per unit
- Lender caution: Mortgage lenders are unfamiliar with commonhold and some are reluctant to lend on commonhold properties
- Conversion difficulty: Converting existing leasehold buildings to commonhold requires 100% agreement from all leaseholders - a virtually impossible threshold in large blocks
- Legal complexity: The community statement and association structure can be complex to establish
- Lack of awareness: Many buyers, solicitors and estate agents are unfamiliar with commonhold
The Future of Commonhold
The Law Commission published detailed recommendations in July 2020 to reinvigorate commonhold, including lowering the conversion threshold and simplifying the legal framework. The government has committed to making commonhold the default tenure for new flats, but significant further legislation is required to achieve this.
The Leasehold and Freehold Reform Act 2024 includes provisions to prepare for wider commonhold adoption, including the establishment of a Commonhold Council to oversee the transition.