A significant overhaul of property ownership laws is on the horizon for England and Wales, with commonhold set to become the standard tenure for new-build flats. This move, outlined in the Commonhold and Leasehold Reform Bill announced in the King's Speech, aims to address widespread dissatisfaction among leaseholders regarding high costs, opaque management, and limited control over their homes. While commonhold has existed in law for over two decades, it has seen minimal adoption, with government figures indicating fewer than 20 commonhold developments comprising under 200 units built to date.
Commonhold fundamentally changes the nature of flat ownership. Unlike leasehold, where a property is owned for a fixed, depreciating term, commonholders own their unit's freehold indefinitely. Crucially, they collectively manage the shared elements of the building – such as the roof, structure, hallways, and lifts – through a commonhold association. This association, comprising all unit-holders, is responsible for budgeting, collecting contributions, and making decisions, replacing the traditional landlord-tenant hierarchy prevalent in leasehold arrangements. This structure is governed by a 'commonhold community statement', which details the rights and obligations for the building and each unit.
Under the current leasehold system, a buyer acquires a lease that grants the right to occupy a property for a set period, subject to numerous conditions. The building itself is owned by a separate freeholder, and leaseholders typically pay ground rent and service charges, with limited input on management decisions. Commonhold seeks to empower residents by placing the ownership and management of the common parts directly in their hands, fostering a more equitable and transparent system.
However, it is vital for prospective buyers and sellers to understand that commonhold is not 'freehold with no strings attached'. A commonhold building still requires insurance, maintenance, repairs, and adherence to fire safety regulations. These costs are still borne by the residents who benefit from the building, though the decision-making and financial contributions are managed collectively by the commonhold association. The commonhold community statement will also typically include rules on alterations, use, pets, and nuisance, similar to those found in leasehold agreements.
Furthermore, commonhold should not be confused with 'share of freehold'. Many flats marketed as 'share of freehold' are still fundamentally leasehold properties, where the owner holds a share in the company that owns the freehold but remains bound by the original lease's terms. Commonhold is distinct because the individual unit itself is held on a freehold basis, with the entire building managed through the commonhold association, fundamentally altering the legal relationship and responsibilities of homeowners.