Leasehold/Commonhold campaign?

by Readers Question

9:26 AM, 18th February 2019
About a month ago

Leasehold/Commonhold campaign?

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Leasehold/Commonhold campaign?

Apart from the Government’s tax and regulation onslaught against Landlords, they are also affecting many Landlords main assets, i.e. their Leasehold property!

This feudal practice was supposed to be fazed out and replaced by Commonhold. However, successive Governments have chosen to ignore it! Leasehold effects Landlords and many people living in flats who think they own their property, they do not!

Articles have recently appeared in the Mail and Telegraph, if you are a Leaseholder have a read. In March I will be meeting our local MP with the Residence Committee of one of our flats, to try and gain his support.

This topic would be a great campaign for Property 118 to champion!

Larry what do you think?

David

Editors Note:

From the government Leasehold Advisory Service >> https://www.lease-advice.org/advice-guide/commonhold/

“WHAT IS COMMONHOLD?

Commonhold is a new type of property ownership, an alternative to the long leasehold system. It allows freehold ownership of individual flats, houses and non-residential units within a building or an estate. Ownership is not limited by time as it is with a lease.

The rest of the building or estate forming the commonhold is owned and managed jointly by the flat or unit-holders, through a commonhold association.

HOW COMMONHOLD WORKS

A commonhold can only be created out of freehold land, or a freehold building, and comes into effect when the land is registered at the Land Registry as a commonhold. A commonhold can be a new building or an existing building or unbuilt land.

Once the commonhold is in place, the new law provides a statutory framework of rights and obligations between the owners of each flat (referred to as unit-holders) and between the unit-holders and the commonhold association.

The framework is relatively simple:

  • The freehold estate in commonhold land is divided into units and common parts. A unit may be a flat, or may have some non-residential use like an office or shop, and could include a garage or a parking space. The Land Registry will create a registered title per unit and one for the common parts.
  • Each unit-holder owns the freehold of a unit. As a freehold, the unit will not be subject to restrictions on its sale or transfer or be subject to forfeiture; however, its use will be governed by the rules of the commonhold.
  • The common parts are every part of the building that is not contained in a unit, for example, in a commonhold comprising a block of flats, the common parts will include the actual structure – the walls and roof, the lift and the stairs etc, and common areas such as the corridors and entrance hall, the car park etc. The freehold of the common parts is owned by the commonhold association.

The unit-holder is entitled to be a member of the commonhold association. Only unit-holders within the commonhold may be members of the association and ownership of the unit provides the entitlement to be a member, although there a special rules in relation to joint owners.

The commonhold association is a limited company, registered at Companies House. It is run according to its Articles which are available for inspection at both Companies House and the Land Registry. The Articles are prescribed by the regulations and set out the functions of the commonhold association.

The commonhold association is subject to the provisions of the Commonhold and Leasehold Reform Act 2002, the Commonhold Regulations 2004 and the Commonhold Community Statement (CCS). The CCS will define the extent of each unit and the common parts and the percentages each unit will contribute to the running costs of the building. It will also set out the duties and obligations of the commonhold association and of each unit-holder. This is similar to the rights and obligations of both freeholder and a leaseholder contained in leases, but the difference is that there will only be one document for the whole building, not one per flat. The Commonhold Community Statement will be registered along with the commonhold association’s title at the Land Registry.

The CCS provides for a commonhold association to set a commonhold assessment, the estimate of the overall costs of the general operation of the building, its maintenance, repair and insurance. There may also be one or more reserve funds.

The commonhold association will request payment from each unit-holder in accordance with the percentage allocated to each unit in the Common-hold Community Statement.

Although the unit-holder will own a freehold flat, he or she will not have complete freedom to do anything he wishes in the property. The use and occupation of the flat will be subject to the rules of the Commonhold Community Statement, perhaps relating to letting, alterations and nuisance, similar to the restrictions often contained in leases.

The unit-holder will have the opportunity to actively participate in the decision-making process in the running of the building. In managing the building the commonhold association will have a role similar to a landlord under a lease, but the difference in a commonhold is that the unit-holder will be represented in that association and be able to express a view on management. This will bring responsibilities. Commonhold is based on ownership and management of the common asset, the building, by the group of unit-holders; as such, each unit-holder should be prepared to be involved in decision making, to attend and vote at meetings of the commonhold association. This principle of self-management means that unit-holders will not need, and do not have, many of the various statutory rights and protections available to leaseholders.

THE COMMONHOLD ASSOCIATION

The commonhold association is the vehicle which owns and manages the common parts of the building or estate, and to which all unit-holders belong. It is a company limited by guarantee which means that its members, the unit-holders, are limited in their personal financial liability should the company collapse or be wound-up; the legislation limits that liability to £1 per member. There are no shares or share capital. Although an ordinary company under company law, the commonhold association is subject to special rules.”



Comments

April

11:44 AM, 18th February 2019
About a month ago

This would certainly help me. Although the freeholders of my leasehold properties are reasonable, the fear that the freehold will be sold to a less scrupulous freeholder weighs on my mind and I'm sure it has had an effect on the capital growth of my leasehold properties. Commonhold, with a good managing agent, would mean the end of the problem. The only difficulty being that freeholders would need to be paid off. I'm not sure what the equation to calculate the "payoff" might be and whether this could be added to one's mortgage on the basis that it has increased the value of one's property/their asset.

LVW4

11:58 AM, 18th February 2019
About a month ago

David, you are quite right. Property118 should be championing this campaign. But it is not only apartments which are affected. The past few years, developers have been selling houses as Leasehold, and making obscene profits by selling on the freeholds to ground rent investment vehicles, and from the government's Help-to-Buy scheme.
However, it sounds like you are unaware of the activities of the National Leasehold Campaign (please join on Facebook), which, along with Leasehold Knowledge Partnership, has been responsible for driving the development of an All Party Parliamentary Group on leasehold reform, which currently has 160 members. Please ensure your MP is a member. (https://www.leaseholdknowledge.com/appglist)
Leaseholders include many thousands of BTL landlords, who know only too well how freeholders and their agents exploit them. Unfortunately, the vast majority of leaseholders who bought their 'homes' believing they would own them, really don't understand they are only 'renting', until it's too late. Leasehold is a scandal on a scale far bigger than PPI (which was not really a scandal which ruined lives!).
The more noise everyone makes about this, the better chance we will have of seeing Commonhold in England & Wales (already in Scotland).

Neil Patterson

13:34 PM, 18th February 2019
About a month ago

Leasehold Solutions calls Housing Minister’s select committee evidence a disgrace

>> https://www.property118.com/leasehold-solutions-calls-housing-ministers-select-committee-evidence-disgrace/


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