The Law Commission has given its backing to making commonhold a “viable alternative” to leasehold ownership for flats.
It has launched a consultation – following a call for evidence earlier this year – that sets out the challenges and options to boost commonhold as part of its wider work on leasehold reform.
The Law Commission states that while its own work and Government reforms should improve the position in leasehold, they cannot remove the inherent problems with leasehold ownership such as a lack of control for home owners and a time limit on ownership.
The answer to those problems, it argues, lies in commonhold.
Commonhold was introduced in 2002 to allow a person to own a freehold flat and at the same time be a member of the company which owns and manages the shared areas and the structure of the building, but there are issues in getting it set up.
Under the current law, to convert to commonhold it is necessary to obtain the consent of everyone with a significant interest in the property, including all long leaseholders.
The Law Commission said it is “almost impossible to obtain the agreement of all leaseholders in all but the smallest blocks”, so instead has proposed that either leaseholders who do not consent could be permitted to retain their long lease after conversion or alternatively those who do not consent could be given a commonhold interest which would have to be paid for when the unit was sold to the next owner.
The document also addresses concerns from developers over how commonhold would work on mixed-use blocks that combine residential and commercial premises.
It suggests the introduction of sections within commonhold, based on company law principles of class-voting.
This would allow different interests within the same commonhold to be separated out.
Unit owners would be entitled to vote on, and be responsible to pay for, matters which affect their section, but would not vote on or pay for issues affecting other sections.
The document also proposes replacing service charges set by a landlord with commonhold contributions that would have to be approved by a majority of those paying them.
Professor Nick Hopkins, commissioner at the Law Commission, said: “Commonhold provides a once in a generation opportunity to rethink how we own property in England and Wales and offers home owners an alternative system to leasehold.
“It involves a culture change, moving away from an ‘us and them’ mindset, towards ‘us and ourselves.’
“We want to hear what people think of our proposals so we can be sure the commonhold system will work for homeowners and the wider property sector.”
The consultation closes on March 10.
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