In 2016, 98% of flats were purchased ‘leasehold’ – giving the purchaser ownership of the property for a fixed number of years during which they pay ground rent to the landlord (or freeholder).
Ground rent covers repairs to common areas, such as communal entrances or hallways, foundations, lifts and roofs.
Leaseholders often complain that they are overcharged for ground rent, and it can be expensive to extend. Leaseholds invest substantial sums of money in their homes but have little security or control over the running of their homes compared to other owner occupiers.
Mortgage lenders will not lend on short leaseholds and leasehold property can be difficult to re-sell.
Latterly much has been published about inflated leasehold prices and leaseholds that have been sold on – or small print that has allowed unscrupulous, greedy landlords to apply massive increases.
So why are so few flats sold as ‘commonhold’?
In 2002, the Commonhold and Leasehold Reform Act introduced commonholds. Although commonhold is well established in other countries, since it was introduced in England and Wales only twenty commonhold developments have been built.
There are many benefits:
- Commonholders have no landlord – there is no division between leasehold and freehold.
- Commonholds don’t depreciate in the same way that leaseholds do.
- Commonholders are residents who form a management company that allows them to vote on how their building is run and how money is spent on the upkeep of the property.
- Commonholders own their homes outright and there is no lease, much the same as a freehold property.
Rather than commonhold being an unknown mystery, isn’t it time the government encouraged owners of flats and housing blocks to group together in their own interests? The government recognises that leaseholds are ‘fundamentally flawed’ and some MPs have called for them to be banned.
But while leasehold developments continue to be available, it seems likely that commonholds will be out of reach of most people for some time to come.
SH/LCB