Enfranchisement & RTM
Is commonhold or leasehold better? Mari Knowles looks at a debate that has been quietly
S ince commencement of the Law Commission’s review of commonhold and of enfranchisement of leasehold properties, there have been various articles written about the reforms. By the time of publication, the Law Commission will have published their final reports which is likely to suggest substantial changes to the landscape of home ownership. This will inevitably raise a debate that has been quietly bubbling away for a few years now: which is commonhold or leasehold better? Is one really better than the other and where will we be in years to come? The leasehold system is a well- established form of ownership that has been around for centuries. The lease traditionally relied on the principle of mutual benefit and burden. The landlord receives a small income in the form of ground rent in exchange for giving up the right to occupy the property. In exchange, the leaseholder
bubbling away for years
form of ownership, mainly because of the practical difficulties of implementing commonhold. The Law Commission had the unenviable task of fixing those difficulties with a view to promoting commonhold in the future. But will commonhold truly fix the abuses that triggered these reforms? The answer is maybe, but not really. Without a doubt it will resolve the onerous ground rent issue and some of the other abuses reported. However, the building is still going to need maintaining; decisions will still need to be made on the day-to-day running of the building; consents will still need to be granted and inevitably disputes will still arise. Instead of contending with a third-party landlord, arguments
Law Commission will be making recommendations to improve commonhold, with a suggestion that it should replace leasehold entirely in the future. Discussions so far have been focused predominantly on “commonhold or leasehold” as if the outcome fixes both ownership and management issues. Without addressing the practical issues of running a building in tandem, commonhold will not be a complete solution. The “Holy Grail” would ideally be a hybrid of the two: taking the best parts of both. Ultimately, property ownership should not be about making money, but having the right to live in a building which is properly managed, and preferably, where appropriate, where its residents own or have a say in how that building is managed. The Law Commission’s work goes a long way to moving us back to a mutually beneficial system, for which we are thankful. Mari Knowles is a solicitor at Commonhold and Leasehold Experts Limited
homes: leases were granted where properties should have been sold as freehold. Ground rents soared beyond any level of acceptability. Service charges escalated but the level of service received in exchange dropped. It is fair to say that there was no (or very little) mutuality in these cases. These abuses attracted the attention of Parliament which then led to the Law Commission’s appointment. While the abuses were suffered mainly in the context of new-builds, the Law Commission was tasked with reviewing enfranchisement and commonhold in a much wider context. Rightly or wrongly, this led to concern within the industry that the law was being changed to fix issues that simply did not exist in the majority of leasehold cases. Throughout the debate on whether leasehold was being abused or not, it was often commented that commonhold was the answer: make commonhold mandatory and the abuses will stop. Commonhold is a little used
lives at the property and pays that ground rent to the landlord. The landlord maintains the building but
receives remuneration from the leaseholders. The leaseholders get the benefit of a maintained building but have to pay the landlord for that privilege. It was a system that, whilst it had its issues, on the whole worked well. Until recently! There was a pressing demand for new homes following the last recession in 2008, which led to an influx of new-build homes. Somehow, the “mutual” aspect of the benefit and burden principle lost its way for these new-build
will instead be between neighbours, which might
arguably be worse because of the personal relationships involved. Having assessed both systems extensively, there are parts of both that work well. The problem is that there are just as many issues with each system too. The
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