News & Insights

Commonhold: The Freeholder & Managing Agent’s Perspective

  • Posted on

David Lowry, Associate Solicitor in JB Leitch Real Estate, provides useful insight and analysis on the much-discussed subject of Commonhold...

What is Commonhold?

As we are all aware Commonhold is an alternative property ownership structure designed for multi-unit developments such as apartment blocks or mixed-use buildings. It allows individuals to own their units outright while collectively managing shared spaces, such as hallways, gardens, and other communal areas.

Key Features of Commonhold:

  1. Individual Ownership of Units: Each flat or unit is owned outright, similar to freehold ownership, removing the need for long-term leases.
  2. Collective Responsibility for Common Areas: Residents collectively own and manage shared spaces, taking on responsibilities traditionally held by freeholders or managing agents.
  3. Commonhold Association: A legal entity made up of all unit owners is responsible for managing and maintaining the property, including financial management of insurance, utilities, and repairs.
  4. No Leasehold Interest: Unlike leasehold arrangements, commonhold eliminates ground rents and lease expiries, granting owners full control over their properties and shared areas.

Introduced in England and Wales in 2004, commonhold has struggled to gain traction due to financing challenges, lack of familiarity, and limited lender support. Currently, fewer than 20 commonhold developments exist in these regions. However, the government has signalled its intent to revitalise commonhold through the Leasehold and Commonhold Reform Bill, expected in late 2025.

Challenges and Implications for Freeholders and Managing Agents

While commonhold aims to simplify ownership and management, its adoption poses significant implications for freeholders and managing agents:

  1. Loss of Traditional Revenue Streams:
    • Ground rents and lease extension premiums would no longer exist under a commonhold structure. This necessitates a re-evaluation of financial models for freeholders and managing agents.
  2. Increased Resident Responsibility:
    • Property owners take on direct responsibility for managing and maintaining the building. However, reluctance or inexperience among unit owners could lead to under-maintained properties, presenting risks to the building’s long-term condition.
  3. Administrative Complexity:
    • Transitioning from leasehold to commonhold requires comprehensive changes to management frameworks. Managing agents may still have a role in supporting the commonhold association, but their scope of authority and fee structures would need adjustment.

Lenders’ Concerns

A major barrier to commonhold adoption is resistance from lenders. According to sections 5.9.1 and 5.9.2 of the UK Finance Handbook, many major lenders, including NatWest, Skipton, and Metro Bank, do not currently support commonhold titles. Without lender buy-in, commonhold will struggle to gain traction.

Key issues raised by lenders include:

  • Building Management and Maintenance: Concerns over whether resident-led commonhold associations can ensure effective upkeep and financial stability.
  • Insolvency Risks: The insolvency of a commonhold association could result in all units becoming flying freeholds, undermining property values and lender security.
  • Emergency Funding: A lack of clarity on how emergency repairs and funding are secured or enforced.
  • Voluntary Termination of Commonhold: Uncertainty over how lenders' loans would be repaid if the commonhold structure is dissolved.
  • Conversion from Leasehold to Commonhold: Existing mortgage agreements are not structured to accommodate a switch to commonhold, complicating enforcement.

The Path Forward

For freeholders and managing agents, understanding commonhold is crucial as the government aims to phase out leasehold ownership in favour of this new structure. Stakeholders must actively engage with policymakers to ensure the reform addresses practical concerns, including:

  • A Clear Framework for Management: Ensuring that professional managing agents can assist commonhold associations in maintaining standards.
  • Lender Confidence: Addressing the issues outlined above to gain the support of major financial institutions.
  • Smooth Conversion Processes: Developing straightforward pathways for existing leaseholds to transition to commonhold without disrupting current financial or management arrangements.
  • Provisions for Shared Ownership: Allowing for more inclusive ownership models under commonhold rules.

While other countries—such as Australia (Strata Title) and the USA (Condominium Ownership)—have successfully implemented similar systems, the UK’s approach must carefully balance stakeholder needs to avoid unintended consequences.

With the Leasehold and Commonhold Reform Bill on the horizon, freeholders and managing agents have a pivotal role in shaping the future of property ownership and management. Engaging in discussions now is crucial to help protect interests and ensure a workable system for all parties involved.

    Get in touch

    Please fill in the form and we’ll get back to you as soon as we can.






    I accept that my data will be held for the purpose of my enquiry in accordance with JB Leitch Privacy Policy