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What is commonhold?

The fundamental purpose of this new form of ownership is to allow flats and other units within a commonhold development to be owned on a permanent and time-unlimited basis in the way that freeholders of separate properties have long enjoyed and free of some of the perceived disadvantages of being in a landlord and tenant relationship.

The owner of a unit in a commonhold development is called a unit-holder and effectively owns his or her flat (or other type of unit) as a freeholder in a way that has not been possible under the existing system - due largely to technical difficulties with the mutual enforcement of obligations (or 'covenants') amongst the various parties in a multi-occupancy building. He or she will also be a member, together with the other unit-holders, of the commonhold association whose function is to own and manage communally the common parts and facilities of the development and to levy the charges made under the commonhold assessment for the upkeep of the common areas. Consequently, the individual owner will actually possess two interests in the property as a whole.

Of course, in such a multi-occupancy building where there are a number of interdependent units, it will still be necessary to have a system whereby the common parts of the building - the areas not forming part of any of the individual units (external areas, roof, internal stairs and corridors, lifts etc) - are properly managed and it will also be necessary for activity in the building to be regulated in order to ensure harmonious occupation by the individual unit-holders and the protection of their investments. In the traditional type of block where there are several flats held by lessees, this function is performed by the superior landlord who is usually a separate entity, non-resident and interested only from the perspective of an investor. In a commonhold development, this role will be fulfilled by the commonhold association which will exist principally to give effect to the provisions in the commonhold community statement which, together with the memorandum and articles of association of the commonhold association itself (and any provisions made by virtue of the Act), set out the rules and obligations under which the development is to be run.

All of this represents a radical departure from the system of leasehold tenure that has prevailed post war in England and Wales and is a major step towards true property ownership in the way that is understood in most other parts of the world. Crucially, the terms of the interests that the individual will have under a commonhold will be mainly determined by the terms prescribed by the Act and there will therefore be a good deal of uniformity whereas, at present, the terms of a lease are largely as agreed by the parties with great variations existing depending on the age of the particular lease and the terms which a landlord was prepared to grant and a tenant accept.

In due course, commonhold developments could become the preferred way in which newly constructed or converted buildings are sold in the future and, in time, some existing arrangements may undergo conversion to commonhold if the necessary criteria are met.

From a technical, legal viewpoint, commonhold is not a new legal estate in land and can only be created out of an absolute freehold estate in registered land. More on these terms can be found in the Glossary section.