Law Commission consultation on reinvigorating commonhold - Law Society response

The proposals

We have responded to the Law Commission’s consultation on ‘Reinvigorating commonhold: the alternative to leasehold ownership’.

Commonhold is an alternate form of tenure alongside freehold and leasehold. It was introduced in 2002 but fewer than 20 commonholds have been created since then.

The consultation makes provisional proposals to make commonhold work for homeowners, developers, mortgage lenders and across the wider property sector.

The Law Society first responded to the Law Commission’s call for evidence regarding commonhold in April 2018.

In light of recent dissatisfaction with the current leasehold system, the government has asked the Law Commission to review the existing law on commonhold to provide an alternate tenure.

The consultation paper includes proposals which would:

• enable commonhold to be used for larger, mixed-use developments which accommodate not only residential properties but also shops, restaurants and leisure facilities
• allow shared ownership leases and other forms of affordable housing to be included within commonhold
• make it easier for existing leaseholders to convert to commonhold and gain greater control over their properties
• improve mortgage lenders’ confidence in commonhold to increase the choice of financing available for home buyers
• provide homeowners with a greater say in how the costs of running their commonhold are met, and
• enable homeowners to end unattractive long-term contracts imposed by developers.

This consultation constitutes part of the Law Commission’s wider review of leasehold and commonhold and has an important relationship with other matters currently under review, or to be reviewed, within government or by the Law Commission.

We responded to the Ministry of Housing, Communities and Local Government consultation on implementing reforms to the leasehold system and the Law Commission consultation on leasehold home ownership: buying your freehold or extending your lease (PDF 207kb).

We will also respond to the Law Commission’s consultation on right to manage.

Our view

The Law Society supported the introduction of the system of commonhold when it was originally being consulted on and enacted from 1999 to 2005 and continues to support attempts to make the tenure viable and workable.

However, making the commonhold requirements in legislation ‘attractive and workable’ may not be enough, on their own, to encourage widespread adoption.

While long leasehold tenure for residential property remains available, there is no incentive for developers to try out any broadly untried new system, nor incentive for the market (purchase or funding) to accept one.

The causes behind the lack of adoption need to be addressed if commonhold is to have a future as a practical basis for the structure of multiple unit developments with communal services and facilities.

The current commonhold regime should be improved, very largely as the Law Commission now proposes, so that it has some chance of gaining favour with the public and the developers as an acceptable model of co-ownership.

What this means for solicitors

This will depend on:

• how and when the Law Commission’s proposals are enacted
• the nature of the incentives that government might put in place to encourage adoption of commonhold, for example, SDLT and Help to Buy, and
• how the lending community responds.

Next steps

The consultation closed on Sunday 10 March.

The Law Commission will publish its final report in 2019.

Read the consultation and a summary on the Law Commission website