ISSUE 7/05

Buying a flat? Is it Leasehold or Commonhold? What's the difference?

By Kitty Pryse-Jones

Kitty Pryse-Jones

If you are buying a flat, then make sure you are getting the best deal. It could make all the difference and mean that your flat is easier to sell on in the years to come. Until recently most flats were sold with a leasehold. But this had many problems and so a new category of commonhold has now been created as an alternative to property leases.

The "Leasehold" system of tenure has always been fraught with problems:

• The value of a lease diminishes over time; typically it runs for 99 years and becomes more difficult to mortgage as years go by
• As every Lease is arranged on different terms, each one has to be scrutinised in great detail by lawyers which slows down the conveyancing process
• Landlords can have too much control
• Covenants (rules!) in leases are not enforceable between tenants

So the new kid on the block, "Commonhold", has been introduced to address these issues.

Under "Commonhold":

• Each tenant (now called a unit holder) owns the freehold of their own flat (now called a unit)
• No more landlords! Tenants will be responsible for managing themselves
• As there is no lease there is no expiry date
• All units are covered under a common arrangement, which should help speed things up

The UK is unique in its use of the leasehold system. Other legal systems have something similar to commonhold where tenants own their own flats and share responsibility for maintenance of the communal areas.

Under Commonhold, each unit holder owns the freehold of their own unit but will also share responsibility for the maintenance of the common parts. Each unit holder becomes a member of the Commonhold Association (CA) which is a limited company registered at Companies House.

The corporate "rules" of such an association will be set out in its Memorandum and Articles of Association, and its non-corporate constitution will be set out in what is known as a Commonhold Community Statement ("CCS"). The CCS will define the extent of the units and the common parts, impose rules and regulations on the use and maintenance of each of the units and impose duties and rights on all concerned. It will also provide details of the percentage of the Commonhold Assessment (service charges) to be paid by each unit and set out rules for resolving any disputes. There will only be one CCS per block, as opposed to one per unit, which should make things much simpler.

Commonhold is not compulsory, but you can convert an existing leasehold into a commonhold provided that you comply with certain conditions but only if 100% of the interested parties agree.

Commonhold does not necessarily mean the end for maintenance problems in blocks of flats but it does provide much more control for the tenants (unit holders!) without interference from landlords.

Call Kitty if you would like more information.