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The government has announced proposed major reforms to commonhold ownership, aiming to make commonhold the default tenure of ownership. The proposals for change include banning new leasehold flats to ensure that commonhold becomes the default tenure, giving homeowners more control over their properties from the outset.
What is Commonhold?
Commonhold is akin to freehold ownership and allows homeowners to fully own their property outright, without an expiring lease or a separate third party landlord controlling service charges and building management. Owners each have membership in a Commonhold Association who will manage the common parts of the building/estate and consequently each Owner will have a vote in decisions affecting their building, including maintenance costs, and will no longer be subject to ground rent.
Why the Change?
The leasehold system has long been criticised for unfair costs and lack of control for homeowners with many leaseholders face escalating fees and restrictions imposed by separate third party freeholders.
Key Changes in the Commonhold White Paper:
The Commonhold White Paper sets out the following issues that will need to be addressed in the new legislation:-
1. Making commonhold work for all developments, including mixed-use buildings and shared ownership properties.
2. Stronger protections for mortgage lenders to ensure financial security in commonhold buildings.
3. Clear rules for property management, covering repair standards, reserve funds, and director appointments.
4. More democratic decision-making, giving homeowners control over budgets, service charges, and building rules.
5. A new Code of Practice to improve transparency in cost allocation and managing agent regulation.
What Now?
A draft Leasehold and Commonhold Reform Bill will be published later this year, setting out the legal framework for these changes. The government will also launch a consultation to finalise the ban on new leasehold flats.
The White Paper can be read in full here.
