Commonhold Reform: What Leaseholders Need to Know
A comprehensive guide to commonhold reform in England and Wales. Understand how commonhold works, why it matters for leaseholders, and how proposed changes could transform flat ownership across the country.
What Is Commonhold?
Understanding commonhold meaning is essential for anyone involved in flat ownership. Commonhold is a form of property ownership specifically designed for multi-occupancy buildings, introduced by the Commonhold and Leasehold Reform Act 2002. It allows individual unit owners to hold freehold title to their flats while collectively owning and managing the shared parts of the building.
Unlike the leasehold system, where flat owners hold a diminishing asset tied to a fixed-term lease granted by a freeholder, commonhold provides permanent ownership with no expiry date. There is no landlord or freeholder sitting above the unit owners, and no ground rent is payable.
Under commonhold, a commonhold association is established as a limited company to manage the building's common parts. Every unit owner is automatically a member of this association, giving them a democratic vote on how the building is maintained, what service charges are levied, and how major decisions are made. This stands in stark contrast to leasehold, where freeholders often retain significant control over management decisions.
Key Features of Commonhold Ownership
- Freehold ownership of individual units with no expiring lease term
- No ground rent payable to any third-party freeholder
- Democratic management through a commonhold association
- No lease extensions required as ownership is perpetual
- Collective responsibility for the upkeep of shared areas and building structure
Learn more about how commonhold works in practice in our detailed commonhold guide.
Why Did Commonhold Fail?
Despite the introduction of commonhold in 2002, the uptake has been negligible. In over two decades, fewer than 20 commonhold developments have been registered in England and Wales. Several significant factors contributed to this failure of commonhold to gain traction.
Developer resistance has been a primary obstacle. House builders and property developers have had little financial incentive to adopt commonhold when the leasehold model allows them to retain the freehold and generate ongoing income through ground rents. The sale of freehold reversions also represents a lucrative secondary market that commonhold would eliminate entirely.
Lender reluctance has also played a critical role. Many mortgage lenders have been unwilling to lend against commonhold properties due to unfamiliarity with the structure and concerns about the enforceability of commonhold community statements. Without readily available mortgage finance, commonhold properties become difficult to buy and sell.
The conversion requirements for existing leasehold buildings have been prohibitively demanding. The original legislation required unanimous consent from all leaseholders in a building to convert to commonhold, making it virtually impossible in larger developments where even a single dissenter could block the process.
Additionally, the legal framework itself contained gaps and uncertainties. The commonhold community statement, which governs the rights and obligations of unit owners, lacked the flexibility and familiarity of traditional lease covenants, creating legal uncertainty that deterred both conveyancers and purchasers.
Main Barriers to Commonhold Uptake
- Developer financial incentives favour retaining freeholds and ground rent income
- Mortgage lender hesitancy due to unfamiliarity with commonhold structures
- Unanimous consent requirement making conversion from leasehold impractical
- Legal uncertainty around commonhold community statements and enforcement
- Lack of government enforcement or mandates for new-build commonhold adoption
For more context on the existing leasehold system and its challenges, see our leasehold management guide.
Proposed Commonhold Reforms
The Law Commission published its landmark report on commonhold reform in July 2020, setting out over 120 recommendations to reinvigorate commonhold and address the barriers that had prevented its adoption. These proposals form the foundation for the government's plans to make commonhold a viable alternative to leasehold.
A central recommendation is to make commonhold the default tenure for all new-build flats in England and Wales. This would require developers to sell flats as commonhold units rather than on long leases, effectively ending the creation of new residential leasehold properties in multi-occupancy buildings.
The proposed reforms also address the conversion process for existing leasehold buildings. Rather than requiring unanimous consent, the Law Commission recommends reducing the threshold to a significant majority, potentially 80 per cent of leaseholders, with protections for dissenting owners to ensure fairness during the transition.
Further recommendations include strengthening the commonhold community statement, improving governance structures for commonhold associations, creating clearer rules for managing mixed-use buildings, and establishing a regulatory framework to support both new commonhold developments and conversions from leasehold.
Key Law Commission Recommendations
- Default commonhold for all new-build residential flats
- Reduced conversion threshold from unanimity to a significant majority
- Enhanced governance rules for commonhold associations
- Mixed-use building provisions to accommodate commercial and residential units
- Improved dispute resolution mechanisms for commonhold owners
- Mortgage lender engagement to increase availability of commonhold finance
Explore how these proposals sit within the broader legislative landscape in our leasehold reform guide.
Commonhold vs Leasehold vs Freehold
Understanding the differences between commonhold, leasehold, and freehold is crucial for anyone buying, selling, or managing residential property in England and Wales. Each ownership type carries distinct rights, responsibilities, and financial implications.
Freehold is the most complete form of property ownership, granting outright ownership of both the building and the land it stands on in perpetuity. It is the standard tenure for houses but impractical for individual flats in a shared building. Leasehold grants ownership for a fixed term, typically 99 to 999 years, with the leaseholder paying ground rent to the freeholder and adhering to lease covenants. Commonhold bridges this gap by enabling freehold-style ownership for flats within multi-occupancy buildings.
| Feature | Freehold | Leasehold | Commonhold |
|---|---|---|---|
| Ownership Duration | Perpetual | Fixed term (99-999 years) | Perpetual |
| Ground Rent | None | Payable to freeholder | None |
| Management Control | Full control | Limited by lease terms | Democratic via association |
| Suitable for Flats | No (impractical) | Yes (most common) | Yes (purpose-designed) |
| Lease Extensions | Not applicable | Required and costly | Not required |
| Mortgage Availability | Widely available | Widely available | Limited (improving) |
The advantages of commonhold over leasehold are significant. Unit owners are not subject to a diminishing asset, do not face costly lease extension processes, and retain collective control over their building. However, commonhold demands active participation from owners in the management of shared spaces and requires cooperation through the commonhold association.
Disadvantages of commonhold include the current limited mortgage availability, the relative novelty of the structure in the English and Welsh property market, and the potential for disputes among unit owners where consensus is needed for major decisions.
For a deeper comparison of property ownership types, visit our freehold vs leasehold guide.
Converting Leasehold to Commonhold
One of the most significant aspects of commonhold reform is the proposed framework for converting existing leasehold buildings to commonhold . This process would allow leaseholders in existing developments to collectively transition away from leasehold tenure and gain full freehold ownership of their units.
Under the current legislation, conversion requires unanimous consent from every leaseholder in the building, which has proved virtually impossible to achieve in larger developments. The Law Commission's proposed reforms recommend lowering this threshold to a qualified majority, likely around 80 per cent, while providing safeguards for dissenting leaseholders.
The proposed conversion process would involve several key steps. Leaseholders would first need to collectively acquire the freehold of the building through collective enfranchisement or already hold it through a freehold management company. Once the freehold is secured, the building can be registered as a commonhold development with the Land Registry.
A commonhold community statement must be drafted, setting out the rules governing the building, including maintenance obligations, service charge provisions, and dispute resolution procedures. A commonhold association is then formed as a limited company, with each unit owner becoming a member. The process requires careful legal planning and professional guidance to ensure all parties' interests are protected.
Steps in the Proposed Conversion Process
- Secure the freehold through collective enfranchisement or existing ownership
- Achieve the required majority of leaseholder consent for conversion
- Draft a commonhold community statement setting out building rules and obligations
- Establish a commonhold association as a limited company for all unit holders
- Register with the Land Registry to formalise the commonhold status
- Appoint professional managing agents if required to handle day-to-day operations
For more on how leaseholders can collectively acquire their freehold as a first step, see our collective enfranchisement guide.
Impact of Commonhold Reform on Block Management
The shift towards commonhold will have significant implications for block management companies and managing agents across England and Wales. While the core tasks of maintaining buildings, collecting service charges, and coordinating repairs remain the same, the governance and accountability structures change fundamentally under commonhold.
Under leasehold, managing agents are typically appointed by the freeholder and answer primarily to them. In a commonhold structure, managing agents are appointed by and accountable to the commonhold association, which represents all unit owners. This shift gives residents direct control over who manages their building and how management fees are spent.
Commonhold associations will need professional support to fulfil their governance obligations effectively. This includes preparing annual budgets, maintaining reserve funds, ensuring compliance with building safety regulations, and managing the administrative requirements of running a limited company. Many associations are expected to engage professional managing agents to handle these responsibilities.
Managing agents who currently specialise in leasehold block management will need to adapt their services for the commonhold model. This includes understanding the commonhold community statement, advising commonhold associations on governance best practice, and ensuring compliance with the specific regulatory requirements that apply to commonhold developments.
At Block, we are actively preparing for the transition to commonhold by developing specialist services for commonhold associations. Our team understands both the current leasehold framework and the proposed commonhold structure, ensuring we can support building owners through this period of change.
How Managing Agents Must Adapt
- Accountability to unit owners rather than third-party freeholders
- Governance support for commonhold associations as limited companies
- Commonhold community statement compliance monitoring and enforcement
- Reserve fund management and long-term financial planning for the association
- Transparent reporting to all unit owners as association members
Learn more about our approach to managing residential buildings in our block management services page.
Frequently Asked Questions About Commonhold Reform
What is commonhold ownership?
Commonhold ownership is a form of freehold tenure for multi-occupancy buildings introduced by the Commonhold and Leasehold Reform Act 2002. Under commonhold, each unit owner holds the freehold of their individual flat or unit, while shared areas such as hallways, roofs, and gardens are managed collectively through a commonhold association. Unlike leasehold, there is no diminishing term or ground rent payable to a freeholder.
Is commonhold better than leasehold?
For most flat owners, commonhold offers significant advantages over leasehold. Unit holders own their property outright with no expiring lease term, no ground rent obligations, and no requirement to pay for lease extensions. Commonhold also provides greater democratic control over building management through the commonhold association. However, commonhold requires collective responsibility and cooperation among all unit owners, which can present challenges in practice.
Can you get a mortgage on a commonhold property?
Yes, it is legally possible to obtain a mortgage on a commonhold property. However, lender reluctance has historically been one of the barriers to commonhold uptake in England and Wales. Many lenders have been unfamiliar with commonhold structures and hesitant to lend against them. Proposed reforms aim to address this by making commonhold more mainstream and encouraging lender participation through clearer legal frameworks and standardised documentation.
Why has commonhold failed in the UK?
Despite being introduced in 2002, commonhold has seen extremely low uptake with fewer than 20 commonhold developments registered in over two decades. Key reasons include developer resistance, lender reluctance to offer mortgages on commonhold properties, the complexity of converting existing leasehold buildings, and the requirement for unanimous consent from all leaseholders to convert. The existing leasehold system also benefits freeholders financially, creating little incentive for change.
Is commonhold replacing leasehold?
The government has indicated its intention to make commonhold the default form of ownership for new-build flats in England and Wales as part of its leasehold reform programme. The Law Commission published detailed recommendations in 2020 to reinvigorate commonhold and make conversion from leasehold more achievable. While full replacement of leasehold is a long-term goal, the transition process will take many years and require significant legislative change.
How does commonhold differ from freehold?
Standard freehold gives the owner outright ownership of a property and the land it sits on, typically applied to houses. Commonhold is a specialised form of freehold designed specifically for multi-occupancy buildings such as blocks of flats. Under commonhold, each unit owner holds freehold title to their individual unit, while the common parts of the building are owned and managed by a commonhold association comprising all unit holders. This structure enables freehold-style ownership in settings where standard freehold is impractical.
Need Expert Guidance on Commonhold Reform?
Whether you are a leaseholder exploring the transition to commonhold, a commonhold association seeking professional management, or a property professional preparing for reform, our experienced team is here to help. Contact us today for tailored advice on commonhold reform and block management.