Will commonhold ever be commonplace?

The King's speech in July of this year included the announcement that the newly elected Labour Government will take steps to bring the "feudal leasehold system" to an end, "reinvigorating" commonhold through a comprehensive new legal framework and banning the sale of new leasehold flats so commonhold becomes the default tenure.  But what exactly is commonhold, what are the perceived benefits of commonhold and will commonhold ever be commonplace?

Commonhold is a form of freehold tenure and was introduced by the Commonhold and Leasehold Reform Act 2002 as an alternative to the long leasehold system.  Whilst it is still perfectly possible to create a new commonhold under the existing regime, uptake has been extremely limited, with just 20 or so commonhold structures created to date.   

Whilst we await the publication of any form of draft bill and / or consultation as to quite how and when commonhold will be reinvigorated, it is anticipated that the current commonhold structure and terminology will used, at least as a starting point, with commonhold providing a structure to manage the relationship between separate individually owned properties.  The basic structure set out in the 2002 Act is relatively simple to describe using the example of a commonhold block of flats:

• Each separate flat comprises a "unit" and will be owned by a commonhold "unit holder".  
• As commonhold is a freehold interest each unit holder owns their flat for an unlimited period with no diminishing lease term, no requirement to pay ground rent and no risk of forfeiture. 
• The common parts of the building are owned and managed by a "commonhold association" company.  Each unit holder is a member of the commonhold association, thereby allowing the unit holders to effectively manage the building.  
• Each commonhold has a "commonhold community statement" essentially a single rulebook (in place of the individual and varied leases in place in a traditional leasehold structure) setting out the rights and obligations of the unit owners and the commonhold association.  
• The costs of maintaining and managing the building are covered by a "commonhold assessment" payable by each unit holder (in place of the service charge payable in a traditional leasehold structure).

It is clearly the Government's intention that, once reinvigorated, commonhold will become the default form of tenure and that this will be achieved by the introduction of legislation to restrict the sale of new leasehold flats and potentially impose commonhold on those that already own a leasehold interest. However, to achieve this the Government will need to address the much-rehearsed shortcomings of the current commonhold regime and will need to present a form of commonhold that will be accepted by developers, landlords, investors, potential unit holders and their lenders alike.  

This will not be a quick or straightforward process and will require complex legislation and consultation.  The first stage will be the preparation and publication of a draft Leasehold and Commonhold Reform Bill.  Whist commonhold remains a key manifesto commitment, and we can therefore expect the Government to be keen to maintain momentum, we are unlikely to see the revised form of commonhold on the statue books before the end of 2025.