Do All Roads Lead To Commonhold?

• Published date: 20 October 2020
• Subject Matter: Corporate/Commercial Law, Real Estate and Construction, Contracts and Commercial Law, Landlord & Tenant - Leases
• Law Firm: Charles Russell Speechlys LLP
• Author: Ms Lauren Fraser and Laura Bushaway

The Law Commission's message to the government from its three reports published on 21 July is clear: to achieve the stated aim of tipping the balance of power in the favour of homeowners, the way forward is commonhold.

Many practitioners eagerly attended training about commonhold when the system was first introduced in 2004, only to find their new skills languishing as the tenure failed to take-off. The Law Commission says that adopting its proposed changes will make commonhold not only a viable alternative, but a preferable one. This could be the start of the biggest shake-up of home ownership in history.

Enfranchisement and right to manage

To deal with perceived issues in the existing residential leasehold system, the Law Commission has also proposed dramatic modifications to the enfranchisement and right to manage procedures.

While the goal of simplifying and clarifying these complicated areas of law is a laudable one, there are some tricky decisions to be made in connection with enfranchisement premiums and landlords' legal costs to achieve the government's goal of reducing the cost to leaseholders.

The Law Commission presented a menu of options and sub-proposals to the government in January 2020 and the report confirmed that premiums must sufficiently compensate a landlord for interference with their property rights. Separately, if the proposals are adopted, the jurisdiction of the First-tier Tribunal (Property Chamber) in England will be significantly expanded to deal with all disputes in these areas.

This seems sensible but it remains to be seen whether the FTT will have the capacity and resources to deal with the increased workload.

Another practical suggestion is for the government to provide free training for leaseholders acting as company directors of residential management companies; a positive educational move to increase leaseholders' awareness of their rights and obligations - although it will be interesting to see how popular this is in practice.

Conversion to commonhold?

Aside from the extensive measures to "improve" residential leasehold, there is a vigorous push towards commonhold. The Law Commission has attempted to solve the fundamental technical problems with the existing regime, but no other commonhold jurisdiction in the world has 4.3m existing leasehold properties. This means that the government must consider tackling the Rubik's Cube of conversion if it is to avoid having a twin-track system of home ownership.

For commonhold to...