What Does Commonhold Mean?
Commonhold is “a system of freehold tenure of a unit within a multi-occupancy building but with shared responsibility for common services.”
But what does commonhold mean practically and in reality? Let’s do some jargon-busting and break it down.
Understanding commonhold
Commonhold was first introduced in 2002 and is a way of owning property in England and Wales that’s a bit different from leasehold and freehold.
Commonhold is like having your own slice of a building. For example, when you buy a flat in a commonhold building you buy a unit and become a ‘unit owner’. As a unit owner, you share the responsibility for the building’s common areas with the other flat owners.
Instead of having a lease that ticks down over time, a commonhold lets you own your unit forever, just like a freehold. The difference is that you and the other owners form a ‘commonhold association’ that makes decisions about the upkeep of shared areas, like gardens, hallways, roofs etc.
Why commonhold matters
Commonhold can be a breath of fresh air if you’re tired of tricky leases and/or distant freeholders. You get more of a say in what happens in your building. Plus, no more worrying about the lease running out because there isn’t one and there is no ground rent.
Is it the same as freehold?
It’s similar but not identical.
A freehold means complete ownership of a property and the land it’s on. Commonhold is a form of freehold for flats, where you own your unit and share the ownership of the building’s common parts.
Can you get a mortgage on a commonhold property?
Yes, although not every lender has caught up with this form of ownership. Speak to a mortgage adviser who will look for a lender for you.
Advantages and disadvantages
To address the shortcomings of leasehold ownership, the introduction of commonhold provides several benefits.
The advantages
- One of the biggest advantages is the element of control. You have a lasting stake in your property (or unit) with no diminishing lease to worry about.
- The unit owners collectively make decisions about the building’s management, fostering a collaborative approach to home ownership.
- No ground rent is payable.
- There is a standardised set of rules and regulations as all documents are in a standard, consistent format.
The disadvantages
- Commonhold isn’t all that common! As a result, there are fewer lenders willing to lend on this type of home ownership.
- The responsibility of shared management means that owners need to be proactive and cooperative, which can prove to be a challenge if disagreements arise.
- Commonhold associations are companies limited by guarantee. Therefore, they need to be managed properly otherwise there is a risk of insolvency should the association be unable to pay its debts. For example, a gardener’s invoice or maintenance fees etc.
Can you convert from leasehold to commonhold?
Yes, but it’s not simple.
Converting a leasehold property to a commonhold involves a significant collaborative effort between the majority of leaseholders and the freeholder’s consent. This can often be the most challenging part.
Like any legal process converting from one legal form of ownership to another can be legally complex and can incur substantial costs.
However, achieving this status means no more lease renewals, eradication of ground rent, and collective management of the property and this can be a powerful driving force. Like anything of this nature, it needs careful consideration of the long-term advantages over the initial hurdles.
If leaseholders can unite and successfully navigate this path, they can enjoy greater autonomy and a more stable form of home ownership. Expert legal advice is essential!
Selling a commonhold property
If you own a commonhold property and you’re thinking of moving, then speak to your local Propertymark member estate agent about the best ways to go about selling it. They’re experts on all things property and will be able to advise you on the best course of action.
Last Updated: October 30th, 2024
