A new lease of life: - CentreForum

A New Lease of Lifeare only 15 commonhold developments in the UK, and the LandRegistry confirms that there are only 152 commonhold unit titles(flats) within these developments. 77 This could be because there islittle interest in it - lessees are happy with the current system andother options such as collective enfranchisement and RTM. But itseems more likely to be because there are large barriers to switchto commonhold, and those involved in the development of newproperties prefer the status quo of leasehold.It is virtually impossible to convert from existing leasehold tocommonhold because the creation of a CA requires the unanimoussupport of all lessees. 78 This is a strict requirement comparedto the half needed to gain the RTM or to buy a share of thefreehold. It is also difficult to acquire a mortgage because lendersdo not have significant experience of commonhold as a form ofproperty ownership and fear that a commonhold association canlack mortgage security if wound up (although this in principle isthe same if a freeholder goes bankrupt). Leaseholders hoping toconvert to commonhold must get permission to do so from theirmortgage providers for the commonhold association to becomeeffective. For these reasons, commonhold is best seen as a solutionfor new developments rather than for existing leaseholders.Commonhold has not been used for new developments of flats,largely because the benefits of commonhold are clearer for buyersthan for sellers. Commonhold is more risky for developers andinvestors who are familiar with leasehold. Leasehold can be moreprofitable because developers can sell leaseholds and subsequentlythe freehold as well. Instead, the benefits of commonhold are enjoyedprimarily by the buyers of properties, who gain responsibility forappointing managing agents and own their property in perpetuity.If commonhold caught on, developers could also benefit as theywould see fewer risks and greater consumer demand could makeit more profitable. So despite the obvious shortcomings of theleasehold system, and the clear benefits of commonhold, there hasbeen little use of commonhold because the obstacles to shiftingto commonhold are significant both for new developments andexisting properties.77 The Leasehold Knowledge Partnership, ‘The 15 commonholds’, www.leaseholdknowledge.com/i-want-to-break-free/the-15-commonholds. The LandRegistry, Disclosures - Commonhold Registration, www1.landregistry.gov.uk/right-to-information/disclosure-log/organisation78 Barry Gardiner MP described this 100 per cent qualification as the “the deathknell of commonhold” in the House of Commons, 8 January 2002.44