Introduction

This guide is not meant to describe or give a full interpretation of the law, as only the courts can do that. And it does not cover every case. If you are in any doubt about your rights and responsibilities, you should get advice from a solicitor who specialises in this area of the law.

Commonhold is an alternative to the long leasehold system. It allows you to own the freehold of individual flats, houses and non-residential units in a building or on an estate. Unlike leasehold, there is no limit on how long you can own the property for.

The rest of the building or estate which forms the commonhold is owned and managed jointly by the flat owners (referred to as unit-holders) through a commonhold association.

Commonhold was introduced in 2002 as a way of enabling the freehold ownership of flats and avoiding the shortcomings of leasehold ownership. However, fewer than 20 commonhold developments have been established since the commonhold legislation came into force.

The Law Commission has stated that they will introduce proposals for improving and reinvigorating the commonhold tenure by modernising the legal framework.

A commonhold can only be created out of freehold land, or a freehold building, and comes into effect when the land is registered at the Land Registry as a commonhold. A commonhold can be a new building or an existing building, or land which has not been built on.

Once the commonhold is in place, the new law provides a formal framework of the rights and obligations that apply between the unit-holders, and between the unit-holders and the commonhold association.

The framework is relatively simple.

• The freehold estate in commonhold land is divided into units and common parts. A unit may be a flat, or it may be used for a business (such as an office or shop), and could include a garage or a parking space. The Land Registry will create a registered title for each unit and one for the common parts.
• Each unit-holder owns the freehold of a unit. This means there will be no restrictions on selling or transferring the units and forfeiture will not apply. (Forfeiture is where a lease can be ended and ownership of the property transfers back to the landlord.) However, you must use the property in line with the rules of the commonhold.
• The common parts are all the parts of the building that are not contained in a unit, for example, in a commonhold of a block of flats, the common parts will include the actual structure of the building (the walls and roof, the lift and the stairs and so on), and shared areas such as the corridors and entrance hall, the car park and so on. The freehold of the common parts is owned by the commonhold association.

As a unit-holder, you are entitled to be a member of the commonhold association. Only unit-holders in the commonhold can be members of the association. All unit-holders can be members of the association, but there are special rules for joint owners.

The commonhold association is a limited company, registered at Companies House. It is run according to its articles of association, which are available for inspection at both Companies House and the Land Registry. The articles of association are prescribed by the Commonhold Regulations 2004 (SI 2004 no 1829) as amended by the Commonhold (Amendment) Regulations 2009 (SI 2009 no 2363) (“the Commonhold regulations”). They set out the duties of the commonhold association.

The commonhold association must keep to the Commonhold and Leasehold Reform Act 2002 (the 2002 act), the Commonhold Regulations 2004 and the commonhold community statement (CCS). The CCS will define the physical extent of each unit and the common parts, and the percentages each unit-holder will contribute to the running costs of the building. It will also set out the duties and obligations of the commonhold association and of each unit-holder. This is similar to how the freeholder’s and leaseholder’s rights and obligations are set out in a lease, but the difference is that there will only be one document for the whole building, not one for each flat. The CCS will be registered along with the commonhold association’s title at the Land Registry.

The CCS allows a commonhold association to set a commonhold assessment, which is the estimate of the overall costs of managing, maintaining, repairing and insuring the building. There may also be one or more reserve funds. (In some commonholds the unit-holders pay extra fees which are paid into a reserve fund and kept until they are needed for large, but infrequent, work projects such as decorating the outside of a property or replacing the lift, boiler or roof. This means the cost of major work can be spread over a number of years.)

The commonhold association will ask you for payment in line with the percentage each unit-holder must pay under the CCS.

Although you will own a freehold flat, you will not have complete freedom to do anything you want in the property. You must keep to the rules set out in the CCS. These will be similar to the restrictions often contained in leases and may relate to, for example, letting, alterations and nuisance.

You will have the opportunity to actively take part in any decisions relating to how the building is run. In managing the building, the commonhold association’s role will be similar to the role of a landlord under a lease. The difference is that, as a unit-holder, you will be represented in that association and will be able to give your views on how the building should be managed, but this will also bring responsibilities. Commonhold is based on a group of unit-holders owning and managing the common (shared) asset (the building). Each unit-holder should be prepared to be involved in decision-making, and attend and vote at meetings of the commonhold association. This principle of ‘self-management’ means that you will not need, and do not have, many of the rights and protection that leaseholders have by law.