Do they represent a new model for homeownership?
The government recently published a new white paper, The proposed new commonhold model for homeownership in England and Wales.
The commonhold model allows flat owners to collectively manage their buildings through a commonhold association, giving flat owners more security and control over their properties than they would have under the traditional leasehold model.
Commonhold ownership is not new. The legal framework for it was introduced by the Commonhold and Leasehold Reform Act 2002 and a new era in land ownership was promised.
The Government says the current commonhold regime is to “be reinvigorated” through the introduction of a new legal framework supplemented by a ban on the sale of new leasehold flats so that commonhold becomes the default tenure, however it has stated that the use of leasehold will not be banned until reformed commonhold is up and running which it aims to achieve by the end of this Parliament.
There has been little take up of commonhold ownership over the last 20 years. There are a number of reasons for this. Some lenders are unwilling to lend on commonhold security so it can be difficult for buyers of commonhold properties to obtain mortgages. A further problem is that collective decision making can sometimes result in deadlock, leading to delays in carrying out maintenance and improvement works which can result in disputes between flat owners.
The white paper sets out proposals which aim to address these historic problems. The Government points out that commonhold flats offer more security than leasehold flats because they cannot be forfeited and last for ever, unlike leases which depreciate in value the nearer they get to the end of the term. It is also proposed that protections be put in place for lenders should a commonhold association become insolvent.
A draft Commonhold and Leasehold Reform Bill is expected to be introduced in the second half of the year. A consultation with consumers, developers, property professionals and other stakeholders on the abolition of leasehold properties has also been promised.
There are concerns about whether the proposed reforms will resolve the historic problems associated with commonhold properties and what impact they will have on existing leaseholders and the housing market. It remains to be seen whether the Government will be able to overcome these challenges, balance the interests of those concerned, and deliver their proposed reforms by the end of the Parliament.
To book an appointment or to discuss this further, please contact the Property Dispute Resolution team on [email protected], 01732 770660
This article is for general information only and does not constitute legal or professional advice. Please note the law may have changed since this article was published. We do not accept responsibility or liability for any actions taken based on the information in this article.
