Commonhold and Leasehold Reform

This factsheet is only intended to set out a summary of commonhold and leasehold reform. For full detail and specialist advice you should contact Leasehold Advisory Service (LEASE) at www.lease-advice.org.

Background:

Property in England is owned as freehold or leasehold. It has long been recognised that the leasehold system of tenure had many drawbacks for long-term residential occupiers of flats and houses and since 1967 the Government have attempted to improve the leasehold system with the introduction of the Leasehold Reform Acts 1967 and 1968.

In 2002, they also introduced a new concept of property ownership known as commonhold under the Commonhold and Leasehold Reform Act 2002 (CLRA 2002). The aim was to provide reform for residential leaseholds giving leaseholders new and enhanced rights but ensuring freeholders were adequately protected.

Government have indicated tha,t since its introduction, the take up of commonhold has been low having ‘to compete with the more established leasehold model and due to some limitations in the current legal design of commonhold limiting its use.’ The Government are however working with the Law Commission to ‘establish reforms to the commonhold legislation to reinvigorate commonhold as a workable alternative to leasehold.’

Since 2002 there has been the introduction of the Leasehold Reform (Ground Rent) Act 2022 to restrict the use of ground rents in future leasehold buildings and more recently there are plans to make further change under the Leasehold and Freehold Reform Act 2024.

Commonhold:

Commonhold (introduced under the CLRA 2002), is a type of freehold estate and the title to the land will be registered as freehold. With commonhold, individuals own their self-contained unit and share ownership of common parts of the building. Instead of owning the unit as leasehold, each individual flat or unit will be a separate freehold and the remaining elements of a building will be a ‘common part’. The ‘common parts’ will be owned by the Commonhold Association, which will be a limited company registered at Companies House. Each flat or unit owner will be a member of the Commonhold Association which will be run according to the articles of association for the company.