On 3rd March 2025 the MCLG published its proposals to reform the current system of commonhold to make it more attractive to developers and flat owners.
What is commonhold?
Commonhold is a form of ownership of a flat which, unlike a lease, is not time limited. In a commonhold building the flat owner (to be known as a unit owner) owns the unit and a separate organisation called the Commonhold Association (CA) owns the freehold to the parts of the building and/or the development which are used in common by the unit owners, and in some cases other occupiers of properties at the development.
The unit owners will be members of the CA and can act as directors.
But what are the new proposals?
- Enhanced rights for developers giving them more flexibility particularly in relation to complex or mixed-use developments. Different parts of the site can be separated into “sectors” so that maintenance costs for these areas can charged separately (see below). Developers will also be able to retain control over later phases of the development via the site-specific rules to be included in the Commonhold Community Statement (see below).
- The legal framework will be simplified to make it easier to understand for unit owners and consumers and easier to set up for developers.
- The introduction of a mandatory reserve fund to be used for emergency works and unexpected or major repairs. The unit owners will be able to vote on the level of the reserve fund.
- Buildings insurance will be mandatory.
- There will be an expedited process for the sale of a unit where the unit owner is not paying their share of the maintenance costs.
- The budget for the maintenance and repair charges must be approved by an annual vote of a majority of unit owners. If not approved, the previous year’s budget will remain.
- Any maintenance charges above a threshold to be set by the government can be challenged by the unit owners.
- There will be new rules on how to make changes to the rules which govern the management of the commonhold known as the Commonhold Community Statement (CCS). The threshold for amendments to the CCS will reduce to 75%. However, this only relates to local rules i.e. the parts of the CCS which are specific to that building or that development. It will not relate to the parts of the CCS which are set by the legislation.
- Unit owners or professionals, such as managing agents, can be directors of the CA and there will be new powers to replace directors who don’t comply with the CCS and to appoint external directors if no unit owners wish to take up this role.
- There will also be a process whereby interested parties, such as lenders and unit owners, can apply to the First Tier Tribunal (Tribunal) for directors to be appointed where no unit owners have agreed to take on this role.
- The CA will be able to obtain loans to deal with emergencies. These loans can be secured on the common parts of the building or development or on future contributions to the maintenance costs provided that this is aligned to the interests of the unit owners.
- Mediation is a key theme throughout the proposals as the government much prefers this to court proceedings.
- The government is also going to ensure that when cases do need to go to dispute resolution this will be to the Tribunal and not the County Court.
- There will be greater protections for minority unit owners who can challenge decisions of the CA which adversely affect them at the Tribunal. The Tribunal will have powers to annul a decision of the CA, let it stand or attach conditions to it.
- Mortgage lenders will have enhanced protections and there will be new measures to safeguard the solvency of the CA.
- There will be provisions to include shared ownership leases and other forms of social housing, but more work is needed here as to who will have the voting rights and how the costs for those units will be dealt with.
- The proposals envisage that commonhold could work for commercial property in the future but at this stage the focus is on residential and mixed-use blocks only.
Issues with the current proposals:
- There is no detail in the proposals as to how the costs of applications to the Tribunal and other dispute resolution mechanisms will be paid for or by whom. This will need to be included in the draft legislation.
- The proposals for converting existing buildings to commonhold are still a work in progress. However, the government has ruled out providing loans to flat owners who do not wish to convert.
Whilst the government has committed to making commonhold the default method of owning a flat by the end of this parliament, much work will be needed in order to encourage developers and lenders to embrace it.
Similarly, the legislation needed to effect the changes will be lengthy and complex.
To learn more about the reform, please contact us on 0345 646 0406 or complete our online enquiry form and a member of our Team will be in touch.