Reforms to the commonhold system aim to modernise property ownership across England and Wales by reinvigorating a freehold-based model for multi-occupancy residential buildings. The upcoming Commonhold and Leasehold Reform legislation seeks to make commonhold the standard tenure for newly built flats and simplify the process for existing leaseholders seeking collective freehold ownership.
Key takeaways
- The government's Commonhold and Leasehold Reform agenda proposes to ban the sale of new-build flats on a leasehold basis, establishing commonhold as the default tenure for future multi-occupancy developments.
- Commonhold replaces the landlord-leaseholder relationship with unit ownership: residents own their individual flat indefinitely (without a diminishing lease term) and collectively own communal parts through a Commonhold Association.
- For existing blocks, proposed legislative reforms focus on reducing the statutory conversion threshold, removing the prohibitive historic requirement for 100% unanimous consent.
- Commonhold replaces traditional service charges and landlord-controlled insurance with democratic budgeting governed by a Commonhold Community Statement (CCS) and mandatory statutory reserve funds.
- Commonhold Associations will remain subject to the Building Safety Act 2022, holding legal responsibility as Accountable Persons for Higher-Risk Buildings (18m+ or 7+ storeys).
What Is Commonhold? Legal Structure Explained
Commonhold was introduced under the Commonhold and Leasehold Reform Act 2002 as an alternative to the traditional leasehold tenure. In a commonhold development, there is no overarching freeholder or diminishing lease term. Instead, ownership is divided into two distinct legal elements:
- The Commonhold Unit: The individual flat, owned freehold in perpetuity with no ground rent, expiration date, or marriage value.
- The Common Parts: Shared areas such as structural walls, foundations, roofs, hallways, and gardens, owned collectively by all unit holders through a dedicated legal entity known as the Commonhold Association.
While commonhold has existed since 2004, market adoption remained minimal due to technical defects in the 2002 Act, lender hesitance, and the statutory requirement that 100% of leaseholders and secured lenders had to consent to convert an existing block.
How Commonhold Differs from Leasehold and RTM
Under traditional leasehold, residents purchase a time-limited tenancy carved out of the landlord's superior interest. Even where residents exercise the Right to Manage (RTM), they only acquire statutory management powers; the reversionary freehold interest remains with the landlord.
Commonhold eliminates this separation of ownership and management:
- No Landlord / Freeholder: There is no third-party landlord collecting ground rent or retaining ultimate ownership of the building.
- Direct Governance: The Commonhold Association replaces developer-controlled management and RMCs. However, the Association frequently contracts an appointed professional managing agent to execute day-to-day cleaning, maintenance, and compliance under the direct instruction of the unitholders.
- The Commonhold Community Statement (CCS): The rights, maintenance contributions, and local rules of the building are governed by a standardised, legally binding CCS rather than bespoke, outdated lease covenants.
The Legislative Roadmap for Commonhold Reform
The government published draft legislation to revitalize commonhold following detailed Law Commission recommendations. Key pillars of the draft Commonhold and Leasehold Reform Bill include:
- Banning New Leasehold Flats: Prohibiting developers from marketing or selling new-build flats on long leases, making commonhold the standard legal structure for future apartment construction.
- Streamlined Conversion Pathways: Lowering the conversion threshold for existing leasehold developments, moving away from unanimous consent to allow conversions backed by a qualifying majority, with statutory protections or leasebacks for non-consenting leaseholders.
- Enhanced Governance Frameworks: Introducing "sections" within mixed-use developments to prevent commercial units from dominating residential decisions, alongside stronger debt-recovery mechanisms for unpaid communal contributions.
These reforms are subject to parliamentary pre-legislative scrutiny and committee review before commencement orders are enacted. Conversion for existing blocks will remain an elective option, rather than a mandatory requirement.
What Commonhold Means for Residents
For flat owners in England and Wales, a revitalised commonhold model offers distinct structural benefits:
- Perpetual Security of Tenure: Unit owners will never face costly lease extension negotiations, 80-year marriage value traps, or leasehold forfeiture.
- Budgetary Authority: Financial contributions for upkeep are determined collectively by unit holders through the Commonhold Association budget, eliminating hidden landlord administration markups and secret broker commissions.
- Mandatory Reserve Funds: Legislation mandates long-term reserve fund planning, ensuring blocks maintain adequate capital for future structural maintenance and major repairs.
Compliance and Building Safety Obligations
Transitioning to commonhold changes tenure, but does not alter statutory safety and structural duties. For higher-risk residential buildings reaching at least 18 metres or 7 storeys, the Commonhold Association functions as the legal Accountable Person under the Building Safety Act 2022.
Directors of a Commonhold Association must maintain proper building registration, coordinate Building Safety Case Reports, maintain digital documentation, and comply with fire safety orders overseen by the Building Safety Regulator. Commonhold governance requires reliable corporate administration, professional accounting records, and transparent contractor procurement to protect resident investments and ensure ongoing safety compliance.