Leaseholders seeking to reduce property costs through commonhold reform may not see immediate savings, according to a recent analysis. While many are impacted by the cost-of-living crisis and rising service charges, there is currently little market evidence to suggest that commonhold will be instantly cheaper than leasehold.
The Commonhold and Leasehold Reform Bill, announced in the King’s Speech on 13 May, aims to reinvigorate commonhold, which was first introduced in England and Wales in 2002. A 2020 Law Commission report recommended commonhold as a better model for occupant autonomy in managing buildings, but did not state it would definitely be cheaper.
For those in existing leasehold buildings, converting to commonhold would first require buying the freehold through a process known as “collective enfranchisement,” which comes with a cost. The Housing Minister Matthew Pennycook stated on 29 April that efforts would continue to reduce the cost of buying freeholds.
However, there are theoretical indications that commonhold could lead to lower costs over time. The model mandates a 10-year maintenance plan and a reserve fund, which could help prevent large, unexpected expenses. Additionally, commonhold has fewer administrative procedures for major works compared to leasehold, potentially leading to administrative savings.