What commonhold means for flat owners: from legal duties to shared costs

Article by Katherine Simpson, Partner at Edwin Coe LLP

The draft Commonhold and Leasehold Reform Bill, published in January 2026, has generated plenty of coverage about what flat owners stand to gain. Less has been written about what they will be taking on. For agents advising buyers and sellers of flats, understanding both sides of that equation is important.

What is commonhold?

Commonhold is a form of ownership in which each flat owner holds the freehold of their unit outright. There is no freeholder above them and no lease that is diminishing in term and therefore in value and mortgageability.

The shared parts of the building, including the roof, lifts, corridors and gardens, are owned collectively through a body called the commonhold association. Every flat owner is automatically a member of that association.

The system has existed in England and Wales since 2002 but has barely been used. The draft Bill is designed to change that. Once it comes into force, new flats will be sold as commonhold rather than leasehold. Existing leaseholders will also have a route to convert, if a majority agree.

What are the benefits?

The advantages are straightforward. The bill caps existing ground rents at £250 a year, falling to zero over 40 years, and new commonhold units will carry no ground rent at all. No lease length anxiety, no need for expensive lease extensions, no lender concerns and no forfeiture.

The bill abolishes the threat of losing your home over minor breaches, and affords more control. Flat owners will collectively set the budget for running the building and appoint, or remove, the managing agent.

For buyers, this removes several of the typical complications in flat transactions. For agents, it simplifies a number of the conversations you would normally need to have about lease length, ground rent terms, and service charge history.

What are the responsibilities?

This is where the picture becomes more nuanced. Under commonhold, the flat owners collectively become the commonhold association, being a company limited by guarantee. The directors of that association, who will be volunteers drawn from the flat owners, take on statutory legal obligations, filing annual accounts, exercising reasonable care and skill and avoiding conflicts of interest.

This is not the same as having a freeholder above you who bears those obligations. The expectation is that most associations will appoint a professional managing agent, and in most blocks, they should. But the draft legislation does not require it.

In smaller blocks, residents may find themselves directly responsible for compliance obligations that they are not well-placed to meet. Scotland mandates professional management for larger commonhold equivalents. It would be sensible for England and Wales to follow suit, but the Bill does not go that far.

The cost question

Running costs do not disappear under commonhold. They are simply organised differently. Instead of service charges paid to a freeholder, flat owners contribute to the commonhold association’s budget. Owners vote annually on that budget. If an owner is outvoted and believes the outcome is unfair, they can apply to a tribunal for redress.

What does not currently exist in commonhold is the equivalent of the detailed statutory rights that leaseholders have to inspect service charge expenditure. Commonhold contributions are expressly excluded from some of the new service charge protections being introduced under recent legislation.

That is a gap the government has acknowledged but not yet fully addressed. Buyers moving from leasehold to commonhold should be aware that some of the protections they might expect are not automatically replicated in the new regime.

The two-tier market risk

The practical timeline is significant. New commonhold flats will be built before large numbers of existing leasehold flats convert. The conversion process requires the vote of a majority of flat owners, followed by legal steps that will take time.

A gap in perceived value between newer commonhold stock and existing leasehold stock is a real possibility during the transition period and is something that agents and valuers will need to monitor carefully.

The ground rent cap, expected to take effect around late 2028, will help bring some existing leasehold flats back into more straightforward marketability, particularly where problematic escalating provisions have deterred lenders. But lenders’ own policies on commonhold structures are still evolving, and some may take time to adapt.

Enforcing unit holder obligations

One of the less discussed challenges of commonhold is what happens when individual unit holders fail to meet their obligations, whether by not paying their commonhold contributions, failing to carry out repairs they are responsible for within their own unit, or breaching the rules in the commonhold community statement.

Under leasehold, a freeholder has considerable enforcement leverage, including ultimately, the threat of forfeiture. Commonhold removes forfeiture, which is one of its attractions. But that removal also means the commonhold association loses the most powerful tool available for ensuring compliance.

The draft bill provides mechanisms for the association to pursue unit holders for unpaid contributions, including the ability to register a charge against a unit, but these remedies are more cumbersome and costly to use than the leasehold equivalent. In a block where one or more owners consistently default, the burden falls on the remaining unit holders to fund any shortfall while enforcement proceedings are pursued.

Buyers should understand that they are entering into a collective arrangement in which their own financial exposure is partly dependent on the conduct of their neighbours. For agents, this is worth raising with buyers who are accustomed to the simpler dynamic of paying a service charge to a professional freeholder with established enforcement procedures in place.

Insolvency of the commonhold association

A further risk that has received little attention is what happens if a commonhold association itself becomes insolvent. Under the current draft Bill, the position is not straightforward.

Unlike a residential management company under leasehold, where the freehold interest and the building assets remain separate from the management entity, the commonhold association holds the common parts of the building. If the association were wound up, those assets would need to be dealt with through an insolvency process, with consequences for the flat owners that are not yet fully worked through in the legislation.

The risk of insolvency is most acute where contributions have been systematically underpaid or enforced only partially, the reserve fund has been allowed to run down, or the block has experienced significant disrepair that has not been funded in advance. In any of these scenarios, the association could find itself unable to meet its liabilities.

There is currently no statutory equivalent of the protections that leaseholders benefit from when a freeholder becomes insolvent. In particular, the provisions that protect service charge monies held on trust.

The government has acknowledged that further work is needed, and so it is to be hoped that the final legislation will address the issues more fully. In the meantime, buyers of commonhold units, and their lenders, will want to scrutinise the association’s financial position as part of their due diligence, in the same way that they would review audited accounts and reserve fund levels when buying a leasehold flat.

This is an area where agents can add real value by helping buyers understand what questions to ask.

In summary

Commonhold offers real improvements: freehold ownership, no ground rent, no shortening lease term, and more resident control. But flat owners need to understand that control comes with responsibility, legal, financial, and managerial, and that some of the statutory consumer protections afforded to leaseholders do not yet have clear equivalents in the new regime.

In particular, the mechanisms for enforcing unit holder obligations are less straightforward than under leasehold, and the position on association insolvency remains underdeveloped in the current draft.

The detail of the final legislation will determine whether commonhold becomes the straightforward improvement the government promises, or whether it introduces a new set of complications in place of the old ones.

Katherine Simpson is a Partner at Edwin Coe LLP and a member of the Association of Leasehold Enfranchisement Practitioners (ALEP).