CILEx welcomes commonhold reform – but says leasehold changes must come first

Plans to reinvigorate commonhold are good news for consumers, because they provide another option for home ownership, but leasehold reform needs to come first, the Chartered Institute of Legal Executives (CILEx) has said.

Commonhold enables a person to own the freehold of a unit within a building or development (such as a flat) and also become a member of a company that owns and manages the shared areas – called a commonhold association (CA).

However, fewer than 20 commonholds have been created since the legislation came into force in 2002, and the Law Commission is consulting on reforms to make it more attractive.

Responding to the consultation, CILEx said it recognised the benefits of supplementing the current leasehold framework with an alternative form of tenure.

But it continued:

“Our members have indicated that whilst commonhold may be suitable for new-build developments, in the context of existing properties efforts should be concentrated on reforming the leasehold sector first and foremost.

“Members were conscious that leasehold tenure is already well established, and that an increased uptake of commonhold shall require an adjustment period rendering it a longer-term option for remedying the injustices in home ownership.

“In considering these reforms, the government may wish to be mindful of the importance in leasehold reform to help those in need of a present-day shorter-term solution, as CILEx is conscious that existing leaseholders should not be expected to convert their tenure to commonhold in order to have their rights and interests protected.”

CILEx members identified unwillingness among mortgage lenders to lend on commonhold as the most likely reason for the limited take-up.

“The Law Commission rightly focus on reducing the risk of insolvency within a CA in order to overcome this problem and make commonhold more workable,” the response said. The availability of insurance for CAs was a key part of this.

CILEx members said a lack of consumer and sector-wide awareness of commonhold was the other major problem.

They advised that all advertisements on properties for sale should contain basic details of their tenure to improve public awareness of different land interests and help inform homeownership decisions, ideally supported by a government website on different forms of home ownership.

CILEx President Phillip Sherwood says:

“Commonhold was a good idea at the time it was introduced and still has much to offer consumers and the property market. However, with so many unresolved issues around leasehold at the moment, that is where the focus needs to be for now.

“The very limited take-up to date shows how hard it is to introduce a third element into what has hitherto been a clear binary choice for would-be home owners, so a lot of effort needs to go into ‘selling’ the concept of commonhold before the government can expect to see people become comfortable with it.”

Kindly shared by The Chartered Institute of Legal Executives (CILEx)