What is Commonhold?

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By Alan Draper | Dec 2020

Commonhold came into existence in England and Wales in 2002 through the Commonhold and Leasehold reform act of 2002. This was a significant event in that it was the first type of new property ownership to be created since 1925.

In short, Commonhold allows you to own the freehold title of a flat. The rest of the building is owned and managed jointly by the flat owners through a commonhold association.
For those interested in the detailed mechanics of Commonhold, The Leasehold Advisory Service has written an excellent article here

Advantages of Commonhold

1. You own bricks and mortar

The closest approximation to Commonhold at present is “share of freehold” where the leaseholders jointly own the freehold interest of the estate or building. Contrary to popular opinion, the flats in this legal structure are still leasehold with leases usually being extended to 999 years. This largely overcomes the biggest disadvantage of leasehold in that leaseholders typically own a depreciating asset. In fact even that isn’t strictly true. They own a long-term rental agreement NOT bricks and mortar

2. You remove parasitic third parties

No ground rents, event fees or other payments to faceless freeholders. The “Ground rent” industry is (rightly) under fire with some leaseholders in negative equity due to escalating ground rents and independent freeholders getting rich through spurious administration fees and other charges. Commonhold ends these feudal practices.

3. Your asset isn’t depreciating

Leases are typically granted between 99 and 125 years. The lease will eventually have to be extended and this is always a costly process. The costs of extending a lease typically run into the thousands and the costs escalate considerably when the lease hits an unexpired term of 80 years as “marriage value” begins to take effect.
A period of less than 80 years is generally the point at which estate agents and mortgage lenders consider the length of a lease will adversely affect the value of a property and its ‘mortgageability’. While some lenders may lend, not all will.
Any lease of less than 70 years can start to significantly affect the value of the property when compared to other properties with a longer lease.

Common Ground is actively campaigning for the abolition of the leasehold system and its subsequent replacement with Commonhold. See https://commonground.uk.com/kb_article/common-ground-comment-on-leasehold/

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