The government has recently proposed reforms focused on reintroducing commonhold as a positive form of owning property. Commonhold will allow people to own the freehold title to part of a building or property. It is an alternative to leasehold and is most likely going to benefit flat owners. However, any part of freehold land can be divided into commonhold, such as a car parking space or garage. The reforms include the formation of a Commonhold Council, made up of leasehold groups, industry, and government bodies, whose aim will be to promote the commonhold route to the public as a viable alternative to leasehold.
A commonhold is created out of freehold land or property thus each commonhold owner is effectively a freeholder of a unit of land or property. The advantage of being a commonhold owner is that there is more freedom in terms of what one can and cannot do with their unit, such as the right to sell or transfer the unit. However, unitholders must follow the Commonhold and Leasehold Reform Act 2002, the Commonhold Regulations 2004, and the Commonhold Community Statement (CCS).
When a freehold property is divided into commonhold, a commonhold association should be established for that property. The commonhold association is a limited company, registered at Companies House and governed by the Companies Act 2006. As a company, the commonhold association will need to appoint two directors who can be external to the property, it is common for professionals such as solicitors or property professionals to be directors.
Each company has incorporated articles of association. For commonhold associations, these are the prescribed articles of association in the Commonhold Regulations 2004 (SI 2004 no 1829) as amended by the Commonhold (Amendment) Regulations 2009 (SI 2009 no 2363) which details the obligations of the commonhold association. The commonhold association may wish to add to the articles of association, however, is not permitted to remove or amend any current conditions.
The commonhold association should consist of only the unit-holders. Each unit-holder has the right to be a member of the commonhold association, however, certain rules apply for joint owners. Each unit-holder will be entitled to one vote, however, voting rights may be weighted to benefit those who own larger units. The commonhold association must register the unit-holders as its members on the notification that their purchase has been completed.
The commonhold association will own the freehold of any communal areas of the property, such as hallways and stairways. The Land Registry creates a registered title for each unit as well as a registered title for the communal areas.
The unit-holders will be responsible for managing the property jointly through the commonhold association, including contributing towards running costs of the property. An annual general meeting must be held to discuss issues relating to the property or to pass resolutions, some commonhold associations may have general meetings more frequently.
Please contact John Szepietowski firstname.lastname@example.org at Audley Chaucer for details on this matter or any other legal topic www.audleychaucer.com