The Law Commission has decided to undertake a review of commonhold properties with a view to reforming this maligned form of property ownership. A full consultation paper will be prepared this year with proposals for reform to follow. Many people will be asking “What is commonhold?”, indicating the need for such a review.

The commonhold property model was conceived in 2002 and introduced in 2004 as a third type of property ownership to sit between the freehold and leasehold ownership models. This idea brought us in line with other property ownership models, including “strata title” in Australia and “condominiums” in the United States.

Commonhold ownership enables the holder of the commonhold, known as a commonholder or unit-holder, to own a unit, such as a flat within a building, and be a member of the company responsible for managing the shared areas and buildings known as the Commonhold Association. The unit is held under a long lease, often 999 years, which offers stability for the unit-holder. Commonhold was seen to be advantageous as the ownership is granted for a long term, meaning no lease extension fees.

There are standard rules and regulations to facilitate the conveyancing process and there is no need for a landlord as owners have a stake in the wider building. Removing the landlord was anticipated to reduce the running costs of the development. Despite these benefits it is surprising to note that fewer than 20 commonhold developments are in existence.

When commonhold was introduced it was envisaged that the majority of new build properties would be sold on a commonhold basis. There was even discussion of existing leaseholders converting their property from leasehold to commonhold ownership. These efforts have been hampered by the cumbersome approach used in creating commonhold property along with a lack of competitiveness in the lending market. Lenders such as Santander and the Royal Bank of Scotland refuse to lend on commonhold titles. As such, the use of commonhold as an ownership model has not taken off. This has encouraged the Law Commission to undertake their review.

The benefits of commonhold ownership have been countered by the perceived negatives and societal nervousness of adopting a new type of property ownership. Commonhold ownership has not been given a chance to work due to a slow take up and refusal of leaseholders to convert their properties to commonhold.

The Law Commission review is partly in response to the government proposals to tackle unfair practices in the leasehold market. For example, the government is considering a ban for almost all new build houses. In addition, ground rents on new long leases – for both houses and flats – will be set at zero.

The government is also consulting widely on reforms which are intended to speed up the home buying process. These reforms could result in a change in the understanding and an increased use of commonhold ownership in the future.