Commonhold Community Statement

The prescribed commonhold community statement is set out in schedule 3 to the Commonhold Regulations 2004 (SI 2004 no 1829). This is available from The Stationery Office or you can read it on their website at www.legislation.gov.uk. It is also available in Welsh at www.legislation.gov.uk/wsi.

In simple terms, the CCS provides the framework to manage the building or estate and to regulate the rights and responsibilities of the commonhold community, through one single document. The articles of association govern how the company (the commonhold association) is run, and the CCS governs how the commonhold itself (the building or estate) is run. The Commonhold Regulations apply to both documents.

The CCS:

• identifies the units (how many there are and the extent) and the common parts, by referring to a plan;
• sets out the percentage of the overall running costs of the commonhold that each unit-holder must pay (per unit) under the commonhold assessment;
• sets out the percentage of any separate charge for a reserve fund that each unit-holder must pay (per unit);
• allocates the number of votes the holder of each unit will have; and
• sets the rules for how the commonhold will be run.

The format and most of the content of the CCS is prescribed by the Commonhold regulations and every CCS must include certain requirements. A commonhold association can add extra conditions that are relevant to the individual commonhold but must not amend or delete any prescribed condition. Any extra conditions must be clearly marked by a heading which includes the words ‘Additional conditions specific to this commonhold’ and added at the end of the relevant section or part of the CCS, or as an annex to the CCS. The CCS will not be effective until it is registered at the Land Registry.

The CCS is registered at the Land Registry along with the title documents for the commonhold, so all current and potential unit-holders will have full access to it. It is a document which creates legally binding rights and responsibilities. Owning a commonhold unit creates rights, obligations and responsibilities for the unit-holder, any tenants of the unit and the commonhold association. These are set out in the CCS. This is similar to a lease (owning a leasehold flat creates rights and obligations under the lease). In a commonhold there are no separate leases for each flat – the CCS is a single document which applies to all units in the commonhold.

Definition of the commonhold

The CCS will include a plan, or plans, to show the overall extent of the commonhold and the location and extent of each commonhold unit, the common parts and any limited-use areas (areas which only a particular unit-holder or unit-holders can use, or which can be used by all unit-holders but only for a specific use). It will state the number of units and the rights of access both to and over the units and the common parts.

The CCS will be similar to a lease in that it defines the unit and the rights each unit-holder benefits from and the obligations they must keep to. For example, a unit-holder will have the right to access the common parts in order to reach their unit, but may also have an obligation to allow the commonhold association access to their unit in certain circumstances.

The plan will, of course, need to keep to the requirements of the Land Registry ().

Commonhold allocations

The CCS will show the percentage each unit has to contribute as its share of the overall costs of the commonhold and any reserve fund. These percentages are the commonhold allocations. When added together, the percentages that are allocated to each unit must total 100. Including these percentages in the CCS makes sure that every unit-holder is aware of their contributions and the contributions of the other unit-holders.

The CCS also states the number of votes each unit-holder will have in a poll. This may be based on an equal number of votes per unit, or may reflect the size of each unit, on the basis that a larger unit which pays a bigger contribution under the commonhold assessment should be entitled to a bigger say in how the building is managed. This will need to be decided when the CCS is drawn up.

The rules of the commonhold:

This is the most important part of the CCS and gives both the commonhold association and the unit-holders the power to enforce the other’s obligations. The rules include specific conditions relating to the following.

• The commonhold association’s obligations to repair, maintain and insure the building.
• The commonhold assessment: Each year, the commonhold association must produce an estimate of the income it needs from the unit-holders to maintain, insure, manage and repair the building. When the association gives you notice, you must pay the percentage of this income that is allocated to your unit. The association can also produce emergency and other assessments if this is necessary due to special circumstances.
• Reserve fund: A reserve fund is a special fund to build up savings for an expected future expense, for example, to replace a lift or central boiler system, or repair the roof of a block of flats.
• The CCS states that, during the first year in which the commonhold is registered, the directors of the commonhold association must formally consider arranging for a suitable professional to carry out a reserve study (an inspection of the common parts to advise the directors whether or not it is appropriate to establish or maintain a reserve fund) and must, in any case, carry out a reserve study at least every 10 years. The directors may decide to set up a reserve fund (or funds) or the members of the association (the unit-holders) may pass a resolution that says they must do so.
• The CCS allows the association to set a charge which the unit-holders must pay when they receive notice from the association.
• Diverting rent: If you have not paid your contribution to the commonhold assessment or reserve fund and you let your unit, the CCS allows the commonhold association to say the tenant must pay their rent direct to the association in order to meet the conditions of the commonhold assessment. (This will also meet the obligations your tenant has under their tenancy agreement to pay rent to you.)
• Limits on leasing: Although you can let your flat, any leases granted, of seven years or less, must not be granted for a premium. This is a one off initial payment payable at the point of sale, in addition to any rent due under the lease).The ban on payment of a premium ensures that short leases are used only to enable a unit to be rented by a tenant with no financial stake in the unit.. (This restriction does not apply to non-residential units.)
• How any disputes will be dealt with.
• Local rules: This is the term in the CCS for special rights and obligations that apply only to that particular commonhold. They can be added throughout the CCS, but only in the way that the regulations allow. There is a particular annex which must include the rate of interest that will be applied to late payments (if any), the rules on what the units and the common parts can be used for, the particular details of insured risks and the authorised uses and users of the limited-use areas. The format of the annex is set by law, but the content is not, and the association will draft the necessary rules.
• Development rights: In some cases the developer may want to maintain the right to develop the land or the commonhold in the future. This right will end once the developer has completed the building work and sold the last unit. If the developer has development rights, these will be set out in a final annex of the CCS.

As long as the CCS follows the prescribed structure, the association can make changes to it, for example, to the extent of individual units or to rights that apply to common parts, or can change any local rules. The procedure for making changes will be in line with the rules of the CCS, but all amendments to the CCS must be registered at the Land Registry and will not apply until the amended CCS is registered.