QUESTION

I have been shown a newly built house and would like to make an offer. The sales literature says that the development is a commonhold. I know that commonhold has been in existence for about five years, but how has it fared to date, and what are the drawbacks?

ANSWER

Almost all properties in England and Wales are owned either on a freehold or a leasehold basis, traditional forms of legal title that date to feudal times. The Commonhold and Leasehold Reform Act 2002 introduced a new form of title based on US and continental forms of condominium or “strata” ownership. The new commonhold form of ownership is intended to deal with perceived shortcomings in leasehold title.

It should be said that take-up of commonhold has been painfully slow. Only a handful of schemes are registered at the Land Registry, although a big new scheme of 1,400 commonhold homes is being built in Milton Keynes. It seems that lawyers and property professionals are a bit wary of risking their clients’ money with something new and untested.

Both systems have a number of similarities. For example, whereas leases usually require the leaseholder to pay a rent and a service charge, the 2002 Act provides for equivalent “assessments” to be paid by a commonhold owner.

The most important feature of the new form of title is that residents directly own their own properties. Commonhold is essentially democratic and a majority of unit owners (as opposed to a landlord) decide what should happen within the development. This may not always be as good an idea as it sounds. For example, a majority of unit holders can (in theory) force the minority to sell up and part with their investment. There are significant safeguards for minority unit owners in the legislation and the actual arrangements in place may vary from one development to another. It is therefore very important for an experienced lawyer to check how strong the protection is for minority unit owners before you commit to buy.

Another important point is that, whereas a lease has a finite length, a commonhold is indefinite. When a lease comes to an end, the leaseholder must (at least in theory) return the property to the freeholder. A lease is a wasting asset. This usually does not matter with long leases, but it can be a worry if a lease has only a few years left (for example, lenders may be reluctant to grant a mortgage). These problems simply won’t arise with a commonhold.

There is nothing inherently problematic about a commonhold, provided that your conveyancing solicitor thoroughly understands it.

The writer is a barrister at Tanfield Chambers. E-mail your questions to:

brief.encounter@thetimes.co.uk

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