"Shifting to a commonhold system without first addressing the regulations that caused costs to rise will simply transfer the expense directly onto leaseholders, along with the undesirable administrative burdens that come with them"
- Simon Gerrard - Martyn Gerrard
Prioritising a home ownership system that fairly considers, reflects and balances the interests of all relevant parties is an important, but arduous task. In its attempt to do so, the Labour government’s much anticipated Commonhold White Paper makes clear its intentions to not only ‘reinvigorate’ commonhold tenure, but ultimately establish it as the default form of tenure.
While commonhold isn’t a stranger to the UK housing scene, its limited adoption is telling. With less than twenty commonhold developments in over twenty years since the original legislation came into force, it’s clear that a rebrand is needed.
A complete overhaul and abolition of the current leasehold system, however, may well create more problems than it solves. In my opinion, much of the narrative surrounding the reform has been overly simplistic and fails to duly acknowledge the potential pitfalls of moving to a commonhold model. If the Government is not careful, it could be trading one set of issues for another.
Costing and administrative concerns
A common criticism of the existing system relates to high service charge fees, but realistically, these charges are often a reflection of genuine services at genuine costs.
In recent years, several factors have unfortunately driven these upwards, such as higher utility bills, wages, and, perhaps most notably, skyrocketing insurance premiums, which have surged in response to growing building safety considerations, stemming from the Grenfell tragedy. A report from last year saw an 87% increase in the average cost of building insurance between 2021 and 2024, adding substantial strain to annual service charge fees.
Shifting to a commonhold system without first addressing the regulations that caused costs to rise will simply transfer the expense directly onto leaseholders, along with the undesirable administrative burdens that come with them.
Core to the argument in favour of the commonhold structure is the idea that those who live in a building should be granted the autonomy to exercise control over its management, shared facilities and associated costs. As empowering as this narrative may sound, it is also overly idealistic.
Indeed, commonhold may transfer decision-making powers to homeowners, but, as with costs, it will also place the burden of self-organisation squarely on their shoulders. Homeowners will be required to manage relationships directly with fellow common holders, including those who may refuse to pay communal costs. This will only add complexity and potential problems for common holders, who could find themselves having to enforce financial obligations or take legal action against uncooperative neighbours. The question then becomes: are leaseholders equipped to navigate these challenges, and resolve the inevitable tensions that arise when it comes to self-management?
Market uncertainty
Several aspects of the reform are yet to be firmed, including the proposed ban on selling leasehold flats and the conversion of existing leaseholds to commonholds. This makes it very difficult for people trying to navigate the rental market. As with many things, a lack of clarity leads to a lack of confidence, which also risks deterring investment in the sector, potentially hindering the Government’s wider efforts to address the housing crisis.
Another unanswered question is how long the transition will actually take. Despite the Government aiming to see new commonhold flat blocks by 2029, the timeline is hazy to say the least. Given the magnitude of the project, things certainly aren’t going to change overnight - in fact, the Government has said that it will only mandate the use of commonhold once it is satisfied that the reformed system is ‘viable’.
Presumably then, we won’t see an overhaul until a system has been developed that satisfies all parties: developers, occupiers and lenders – a task that is far from straightforward.
Risks and rewards
Naturally, there are benefits to a commonhold system, but it is far from perfect. When addressing an issue that affects so many people and carries with it numerous competing interests, it’s crucial to paint a full and transparent picture that fairly considers all sides of the coin. In this case, reform could bring about unintended consequences, and the potential risks and challenges should not be overlooked. Ultimately, the change may well do more harm than good.
