Registering a commonhold

In each case, the following four sets of documents must be included with the application form and fee and sent to the Land Registry.

The commonhold association documents

The full documents relating to the established and registered association – the articles of association and the certificate of incorporation showing it has been registered as a company at Companies House. The association must exist before the flat owners can apply to register the commonhold.

The commonhold community statement (CCS)

This will be registered as part of the commonhold title and must be sent to the Land Registry in its final form, not a draft which will be amended in the future. (If there are any changes after the CCS is submitted, the commonhold association will need to apply to register an amended CCS.)

Formal declaration

A formal declaration relating to any permission that is needed from people with an interest in the land.

Certificate by the directors

A certificate by the directors of the commonhold association stating that:

• the articles of association are in line with current regulations
• the CCS is in line with any requirements that have to be met by law
• the overall application for registration is in line with any requirements that have to be met by law; and
• the commonhold association has not traded and does not have any undischarged liability (i.e. that it has paid all of its debts)

This procedure applies where the proposed commonhold is a new development or a converted building, where the new unit-holders have not yet been identified.

The individual units will be sold off at a later stage, after the commonhold is registered. In this case, the developer will form and register the commonhold association and draft the CCS. In cases where the land the application relates to is owned by one or more people jointly with the developer, the developer will need the formal permission of each joint owner not involved in the application. The developer will also need permission from any person who holds a registered charge over (a legal right to) the land, or any part of the land, such as the mortgage provider.

Once the commonhold is registered, it will take the form of a number of separate freehold titles, the individual units (flats, commercial units or garages and so on) and the common parts. There will always be more individual titles than units in the building – each unit title plus the title to the common parts. At this stage, while the development is being built or the building is being converted, the units will be registered in the name of the developer. This is known as the transitional period.

The commonhold is not ‘activated’ until the first unit is sold, and this will also be the end of the transitional period. (The units can be sold after they are completed or ‘off the plan’. Like any other new-build development, the units do not need to physically exist when they are sold.) At that point the commonhold association will be registered as the owner of the common parts and the rights and duties of the CCS come into force. The original owner (the freeholder) will continue to be registered as the owner of the remaining commonhold units until they are sold, after which they will have no further interest unless they have continuing development rights under the CCS.

Once the ownership of the common parts has passed to the commonhold association, unless the developer has development rights under the CCS, they have no further connection with, or influence over, the way the building is managed. There is no situation where the developer can be the landlord – the commonhold association owns and manages the common parts of the building and unit-holders own the units on a freehold basis.

This procedure applies where an existing building, which is in use and occupied, is converted to commonhold. The process is more complicated than the process for registering a commonhold without unit-holders, as formal permission is needed from the current owners or tenants in the building.

As with the process for registering a commonhold without unit-holders, the procedure begins with forming the commonhold association, registering it as a company with Companies House and drafting the CCS. Any person who holds a legal right to the freehold will need to give permission for the commonhold to be formed and their consent is required because conversion will result in the freeholder losing his or her interest in the building.

Any lenders who have an interest secured over any of the land which will become commonhold must give consent. This category includes, for example, banks who have mortgages secured against leaseholders’ leases of their flats. Lender consent is required in this scenario as their security will be lost when the leases are extinguished on conversion. It is likely that mortgage lenders will only consent to the conversion if they are repaid in full before the conversion or are prepared to accept new charges or mortgages over the commonhold units after the conversion.

The rules concerning the permission that is needed from people with a leasehold interest in the building are more complicated, and it is important to understand the reasons for this.

Once the commonhold is registered, any existing lease ends or is cancelled. The units in a commonhold are owned freehold, so there cannot be existing leases relating to them. This means that the leaseholders and anyone with a legal right to a lease must provide formal permission to end the lease. (It may be reasonable to assume that the leaseholder would only give this permission if they were registered as the owner of a unit in the commonhold.)

The rules relating to permission

Long leases which were originally granted for more than 21 years: these leases will end when the commonhold is registered and they are replaced with a commonhold unit.

Leases which were originally granted for less than 21 years: these leases will also end when the commonhold is registered, but whether the leaseholder’s permission is needed depends on whether the person registering the commonhold is prepared to offer the leaseholder a replacement lease on the same terms as their original lease for the same number of years that are left on the original lease. Once the new lease is agreed, this must be entered on the Land Registry to protect the leaseholder. In cases such as these, there are two options relating to permission on the application for registration.

If the leaseholder will receive a replacement lease, they do not need to give permission in the application to register the commonhold.

If the leaseholder will not receive a replacement lease, they do need to give permission in the application to register commonhold.

In all cases, a county court has the power to rule that a leaseholder’s permission is not needed if, after all reasonable efforts, the leaseholder cannot be identified or found or has failed to respond to requests to provide permission.