Last edited 06 Oct 2016

Commonhold

Commonhold’ is a form of property ownership for multi-occupancy properties introduced in 2004 in England and Wales. It enables collective ownership of the freehold of property as an alternative to long leaseholds.

Commonhold was enabled by the Commonhold and Leasehold Reform Act 2002 (CLRA) and is regulated by the Commonhold Regulations 2004.

A commonhold consists of:

  • Individual ‘units’, such as flats, commercial units or individual buildings within a property, the freehold of which is owned by unit-holders.
  • ‘Common parts’, such as stairs and roofs, consisting of anything that is part of the commonhold property but is not a unit. These common parts are owned and managed by the Commonhold Association (CA).

The Commonhold Association is a limited company, members of which must be unit-holders, although unit-holders do not have to become members. It cannot distribute profits which must be ploughed back into the company.

The Commonhold Association manages the commonhold according to an agreed Commonhold Community Statement (CCS) for the entire property, which sets out the rights and obligations of the parties, the extent of the commonhold, charges, the allocation of votes, and dispute resolution procedures.

The Commonhold Regulations 2004 which regulate the operation of commonholds also include a standard memorandum of association, articles of association and Commonhold Community Statement necessary to create a Commonhold Association.

On new-build devleopments, the developer is likely to set up the Commonhold Association in the first instance. Existing leases can be converted into a commonhold, but this requires the agreement of the leaseholders, landlord and any lenders, which may be difficult to achieve.

The advantages of a commonhold include:

  • Unit-holders are able to own the freehold of their unit, rather than a leasehold which devalues during the lease and ultimately expires.
  • There is no landlord and so conflicting interests should be reduced.
  • Charges should more closely reflect costs.
  • There is a common agreement between all the unit holders.

However the unit-holders have greater responsibilities and may wish to appoint a professional management company.

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