Managing a commonhold

The commonhold association, made up of the unit-holders, is responsible for managing the commonhold. There is no separate third-party landlord, and management decisions are made by the board of the association (who answer to the members).

As there is no landlord or tenant, there is no need for the extensive legal rights and protection that are available to leaseholders through the various Landlord and Tenant and Leasehold Reform Acts. This means that, as a unit-holder, you do not have the right to challenge management and other costs at the First-tier Tribunal (Property Chamber) (in England) or the Leasehold Valuation Tribunal (in Wales), and the commonhold association does not have to formally consult you over proposed work or contracts. All disputes are dealt with through the commonhold association’s internal procedures.

The overall idea of commonhold is based on ‘management by agreement’, with all unit-holders able to take part in the decision-making process through their membership of the commonhold association.

The relevant national tribunal has no control over any matter relating to owning or managing a commonhold unit (although they may be involved in some disputes relating to tenants of a commonhold unit-holder).

This is the budget that is needed to manage the commonhold or to carry out repairs or special work. It has to be collected as a contribution from each unit-holder (like service charges under a lease). The board of the commonhold association make the assessment and will send you a notice, using the prescribed form (Form 1), telling you how much you must pay. You then have one month to appeal to the association if you disagree with the amount you are being asked to pay.

At the end of the one-month period, the directors must consider any appeals they have received before issuing the demand for payment to each unit-holder (Form 2). This will tell you how much you must pay and the date the payment is due. (This will be at least 14 days after the date of the demand.)

If urgent work is needed, the association can ask the board to make an emergency commonhold assessment (Form 3). In this case, just the demand for payment is issued, and there is no period allowed for appeals.

If the association decides to create a reserve fund, the arrangements for telling you how much the charges are and how you can appeal, and for sending you a demand for payment, are similar to those for the commonhold assessment (Forms 4 and 5).

As the units are held on a freehold basis, you cannot be threatened with losing your lease and ownership of your flat (forfeiture), and the association cannot prevent you from selling your flat if you do not pay the charges that are due under the commonhold assessment. However, the association can use all normal debt-recovery procedures if you do not pay the commonhold assessments, reserve fund charges or interest.

To recover your debts, including interest on the outstanding amount at the rate shown in the CCS, the commonhold association must take normal action against you through the court. If you have let the flat, the commonhold association can instruct your tenant to make their rent payments to it in order to settlement the amount you owe (Form 6).

The court can judge that the association must register a charging order on the unit, but this will not take priority over other legal rights and mortgages that are already registered. After the charging order has been made, the association may also be able to apply for an order forcing you to sell the flat.

If you sell your flat before settling your debt, the CCS allows the association to give the new owner a notice instructing them to pay the amount you owe. They must then pay within 14 days of the notice. If they don’t, interest will be added to the amount you owe. The intention is to encourage you to pay before selling the flat, as it is unlikely that anyone will be prepared to buy it if this would mean repaying your debt.

If the new unit-holder pays your debt, the CCS automatically gives them the right to recover this amount from you.

Recovering debts is very important in a commonhold, to make sure the association is able to meet its financial liabilities. The association may have no significant assets apart from the common parts. There is no share capital and in serious situations where the association does not have enough money, the remaining unit-holders would have to make up the shortfall.

The CCS sets out how disputes in the commonhold will be dealt with. It is important that procedures are in place to encourage and make it possible for unit-holders and the commonhold association to settle disputes without the need for legal action through the courts.

The CCS provides the following three distinct procedures:

• for a unit-holder or tenant to enforce a right or duty against the commonhold association
• for the commonhold association to enforce a right or duty against a unit-holder or tenant
• for a unit-holder or tenant to enforce a right or duty against another unit-holder or tenant

The procedures are based on standard notices that are prescribed under the regulations, and encourage the people involved to consider using other methods to settle a dispute, such as mediation, arbitration and conciliation, before following the procedures set out below. There may, in future, also be a commonhold ombudsman who will be able to investigate and settle disputes. If other methods are not a realistic option for settling a dispute or have failed to achieve a result, you (or the association) can start the dispute procedures.

The dispute procedures do not need to be used in an emergency or if the association is taking action against you because you have not made a payment that is due.

The procedures are intended to be simple, effective and informal, and are designed to achieve sensible settlements within, and for the overall benefit of, the commonhold community.

Unit-holder (or tenant) against the commonhold association

You (or your tenant) can serve a complaint notice (Form 17) on the association, setting out your complaint. The association has 21 days to consider the issue before serving a reply notice (Form 18). The reply notice may set out the association’s proposals for dealing with your complaint, or may ask you for more information.

In most cases this should settle the matter but, if you are not satisfied, after again considering other ways of settling the dispute, you can start legal action.

Commonhold association against unit-holder (or tenant)

The procedure is very similar to the one above and uses prescribed forms. The association serves a default notice on you (Form 19), setting out its complaint against you. You then have 21 days to respond by serving a reply to a default notice. The association must then decide the appropriate action to take. By law, the association does not need to take any action if it reasonably thinks that this is in the best interests of establishing or maintaining a good relationship between all the unit-holders. This means the association must put the best interests of the community first, and consider the most appropriate action for the whole commonhold.

Unit-holder (or tenant) against unit-holder (or tenant)

This procedure is a little more complicated as the action is not simply between the unit-holders but also through the commonhold association.

If you have a complaint against another unit-holder (or your tenant), you can serve a notice on the commonhold association asking it to take action to deal with the problem (Form 21). Again, the association has 21 days to consider its response before serving its reply (Form 22).

If the association supports your complaint, it can then start the standard enforcement procedure above. If the association does not support your complaint, or considers that taking no action is the best thing to do in the interests of the whole commonhold, it must decide whether to allow you to take the case further.

If the association does not respond within 21 days, or decides that you can take up the issue direct with the other unit-holder, you can serve a notice directly on the other unit-holder (Form 23). The other unit-holder must then send you their reply (Form 24) within 21 days.

If you are not satisfied with the other unit-holder’s response, after considering other methods of settling the dispute, you can start legal proceedings. However, the commonhold association can refuse you the right to take action against the other unit-holder if it considers the issue petty, spiteful or trivial or made simply to cause a nuisance, or that the other unit-holder has not broken their obligations or duties under the CCS. In this case, you can use other methods, such as mediation, to settle the dispute or start legal action, or you could start the dispute procedure against the association.

The commonhold association cannot prevent you from letting your flat. You own the freehold and can do whatever you want with the flat as long as this is within the law. But you must tell the commonhold association within 14 days of granting the tenancy (Form 14) and give it a copy of the agreement. You must give the potential leaseholder a copy of the CCS and a notice telling them that they must keep to it (Form 13). (The leaseholder’s obligations under the CCS do not include paying the commonhold assessment as you will continue to be responsible for that.)

The leaseholder must follow most of the rules and meet most of the obligations of the CCS as though they were the unit-holder, and the association may take action against them under the dispute procedures if they fail to do so.

The association has the right to ask for information about any tenancy that applies to your flat by giving notice to you and the leaseholder (Form 8).