What is a Commonhold Property?

You’ve undoubtedly heard of leasehold and freehold properties, but commonhold might be a new one for you. A commonhold property is where residents own the freehold of an individual property in a multi-occupancy unit or estate. As an alternative to the more traditional leasehold, it gives residents an unlimited occupancy term and puts them in charge of the management of the building or estate. This forgoes the need for a landlord in the role of freeholder and means that service charges and ground rents can be a thing of the past.

In this blog, we look at commonhold property in a little more depth so you can see whether it’s the type of home ownership you might want to consider.

How does commonhold work?

Commonhold was introduced back in 2002 as a way of granting freehold ownership to those living in flats and other leasehold properties allowing them to sidestep the complications and complexities of leasehold ownership. Often found on new developments but also applicable to existing buildings, the land is registered as commonhold with the Land Registry and can only be applied to land or buildings already registered as freehold.

The freehold land or estate is then divided into units and common parts. The units are your houses and flats, the common parts are your shared areas like communal gardens, stairways and so on.

Each occupant owns the freehold of their unit and follows the rules laid out in the commonhold agreement. This means that there is no lease expiry, and therefore, no concern that the property may revert to the landlord or that there may be a substantial drop in value due to an expiring lease.

By becoming an owner of a commonhold, you then become a member of the commonhold association, and it is this group that oversees the common parts we mentioned earlier.

What’s the commonhold association?

The commonhold association is a company made up of the property owners of the building or estate. It looks after the management of the building and its common parts. From these members, a board of directors will be appointed who then create budgets for maintenance, insurance, repairs and so on. Due to the complex nature of property management, it is not uncommon for the board to appoint property experts to handle the property management role.

Can you convert a leasehold to a commonhold?

You can. However, permission would be required from the freeholder and anyone with a registered charge over the freehold. You’ll then need all leaseholders to agree to the switch and gain permission from any mortgage lenders who have mortgages secured against leasehold properties.

What are the advantages of commonhold property?

Commonhold exists to deliver an enhanced ownership method for those hindered by the complex nature of leasehold agreements. As a result, residents of a commonhold property stand to benefit in ways leaseholders may not.

Freehold ownership

By giving the owner freehold ownership, there is no concern of a lease expiring or the expensive renewals that come with it. In addition, where restrictions on what can be done to the home may apply with leasehold, with a commonhold, they are removed.

Management of property

Each unit holder can make key decisions about how their building is maintained and how shared areas are to be used and managed. With no landlords or management companies directing residents on what to do and no unreasonable service charges being applied, residents are in control of how the properties are cared for. This does come with some responsibility though as things such as window cleaners, gardeners and maintenance teams will all need to be sourced and paid for.

Set rules and regulations

Where management companies for leaseholds have a litany of rules and regulations that can vary from property to property, commonholds have a more standardized framework. The Commonhold Community Statement or CCS is a document that must follow a structure as set out in the Commonhold Regulations 2004. It can be adapted to fit specific rules relevant to the building itself but overall, a CCS will be similar from place to place. It’ll contain information such as maintenance obligations, dispute resolution, building insurance and more.

Are there disadvantages to commonholds?

As with anything that has its pros, there will always be cons too. With commonhold property, there are a few to be aware of.

Potential mortgage issues

In most cases, obtaining a mortgage for a commonhold property will not be a problem, however, it can sometimes be tricky. Some lenders may not be too sure about the commonhold model. With concerns over payments to the commonhold association being defaulted upon and arrears mounting, there is a worry for lenders that their cash may be at risk. As a result, some lenders steer clear of commonhold altogether.

Compliance with the CCS obligations

The commonhold association can only exist if the required contributions are made to it. As its status is that of a company limited by guarantee, there can often be the fear of insolvency. This would stem from residents not making their designated payments, and as a result, debts accruing against contractors such as window cleaners or maintenance teams.

Should the association have to dissolve as it can no longer support itself, the common parts will soon fall into disrepair and potentially hinder any sale an owner may wish to make.

Unfair costs

The CCS framework establishes that all unit holders should make contributions to a fund for the entire commonhold. Should the CCS have not been appropriately changed for the particular property, some residents could be paying more for services that do not apply to them. For example, some properties may come with a parking space, but the CCS may request each resident contribute to maintaining the car park. This could be deemed as an unfair charge.

Are commonhold properties more expensive than leaseholds?

They can be. Thanks to there being no lease to worry about, it becomes easier for a property to maintain its value. In addition, the idea of indefinite ownership makes a home more alluring to those considering a new property. Factor in that there is no landlord either and suddenly a commonhold property becomes much more desirable and therefore, potentially more expensive. It can, of course, vary between regions and property types.

On the other side of the coin though, where lenders can be reluctant to offer a mortgage to potential buyers, it can see a seller bring their price down to try and encourage a sale.

If you own a commonhold and have decided it’s time to sell up or want to sell your existing property so you can seek out a commonhold, speak to us. Our team at Bettermove make it easy for you to sell your house fast, enabling you to press ahead with your property plans regardless of what they are. We offer two ways to sell, we can buy your home in just seven days, or, should you want to test the water with a few more buyers, we can present your home to a network of cash house buyers. Regardless of the path you choose, with Bettermove, your sale is guaranteed. Why not speak to our team today to find out more?