The Law Commission has been looking at ways to reinvigorate Commonhold and the consultation closes on 10 March. Their starting point has been to ask why take up of Commonhold has been so low. They present solutions and the consultation lets people pick preferences and add comments. This is a great opportunity for leaseholders to have their say in how the law is written.
Download the summary report here
Read the full report and give your feedback here
Commonhold has been on the statute book since 2002 but there are less than 20 commonhold units in England & Wales. One major reason is that the current law requires the consent not only of 100% of the residents, but also of all mortgage lenders who have an interest in the flats – as well as the freeholder! By contrast, blocks that want to adopt Right to manage only need 50% consent.
So to improve take-up, what should the consent threshold be? 50%? 80%? And what happens with residents who don’t want to convert? Do they keep their lease until it needs extending or they decide to sell? Or are they required to convert along with everyone else?
For Warner residents a 50% threshold would mean they could decide to convert whether or not their neighbour agreed. In most cases it would benefit both but there would be costs involved. They would need to set up, or employ, a Commonhold Association to take care of maintenance (which is more or less what happens now when two flats buy their freehold). In practice this could lead to the growth of professional management agents offering to provide these services.
And those mortgage lenders still have concerns. What if the Commonhold Association becomes insolvent? The current 2002 act doesn’t require it to take out public liability insurance and the Law Commission is proposing this should be a legal requirement.
Inevitably there will be residents who don’t pay their service charges. The Association could if all else fails, set a charge on the flat so that once it’s sold they get paid. But mortgage lenders aren’t too happy about being bumped to second in line in the event of a person falling into serious debt.
Lots of flats sit above shops. How would Commonhold work with mixed developments? Should improvements to shop units be shared amongst the residential owners? Should they be organised as two separate sections within the Commonhold Association?
With all these questions the Law Commission has set out options and is asking for preferences and comments. No doubt freeholders and their lawyers will be filling out all the reasons why it wouldn’t work, but most leaseholders will benefit. So let’s help make it happen!