The introduction of commonhold as an alternative to leasehold will require significant preparation across the property industry to ensure the new ownership arrangements are workable for homeowners, mortgage lenders and building managers.
Delegates at the Association of Leasehold Enfranchisement Practitioners (ALEP) annual conference on 14 October examined the financial, legal and operational challenges involved in implementing the government’s proposed reforms.
Particular concerns included the cost of converting existing leasehold buildings to commonhold, the treatment of outstanding mortgages and the need to establish sustainable arrangements for building maintenance and management.
The discussions took place as the government progresses its draft Commonhold and Leasehold Reform Bill, which proposes a revised commonhold framework, simpler conversion arrangements and a ban on leasehold tenure for most new flats.
Further legislation and regulations will also be required to bring substantial elements of the Leasehold and Freehold Reform Act 2024 into effect.
FINANCIAL AND LEGAL BARRIERS
The conference identified several unresolved issues surrounding the conversion of existing leasehold properties, including how costs would be distributed and what arrangements could be made for homeowners unable to afford their share.
The treatment of existing mortgage agreements and development rights was also highlighted as an area requiring greater clarity.
For lenders, the reforms will need to provide sufficient certainty over the ownership structure, the security underpinning mortgage lending and the financial obligations attached to individual properties.
Delegates also considered the importance of adequate reserve funds, effective governance and appropriate mechanisms for recovering unpaid contributions towards building expenditure.
Mark Chick, director of ALEP, said: “Commonhold is intended to give homeowners greater control over their buildings. Delivering that opportunity requires coordinated preparation across the property sector, from registering ownership and securing a mortgage to day to day financial and practical management.
“The conference brought these perspectives together. It highlighted that residents need to understand the responsibilities they will acquire, lenders need confidence in the security they are financing and practitioners need clear rules and processes through which to advise their clients.”
BUILDING COSTS WILL REMAIN
Another theme was the distinction between changing the structure of property ownership and addressing the underlying costs of maintaining residential buildings.
Although commonhold would give homeowners greater control over decision-making, buildings would still require insurance, maintenance and compliance with safety requirements.
The conference considered how residents could be supported in taking responsibility for these obligations and how professional management arrangements could operate under the proposed framework.
Speakers included Marcus Dixon of JLL, Caley Zappacosta of HM Land Registry, Robert Stevens of Nationwide, Mari Knowles of Commonhold and Leasehold Experts and Jaclyn Mangaroo of The Property Institute.
Henrietta Hammonds and Peter Beckett discussed collective enfranchisement, while Vanessa Griffiths and Adrian Hau examined valuation reform. Piers Harrison provided an update on relevant case law.
The event concluded with a discussion involving practitioners, The Property Institute and Telegraph journalist Madeleine Ross.
IMPLEMENTATION WILL BE KEY
ALEP said the success of commonhold reform would ultimately depend on whether the arrangements could function effectively at the level of individual buildings, rather than simply providing a new legal ownership structure.
Chick added: “Successful reform must be judged by how it works in individual buildings. Can owners make informed decisions? Can necessary work be funded? Can a buyer obtain a mortgage and understand the building’s financial position?
“ALEP’s members bring experience of the transactions, valuations and disputes that will shape those outcomes. We will continue contributing that practical knowledge as the legislation develops, while helping leaseholders navigate the law that applies today.”
