Draft Commonhold and Leasehold Reform Bill: The End of Leasehold as We Know It?

The Government launched its latest leasehold reform via social media, but behind the headlines, the draft Commonhold and Leasehold Reform Bill could cause serious ripples across the property market.

In this episode, we explore what happens when ground rent income disappears, why commonhold has struggled for 20 years, and whether calling it something other than “common” might have helped. More importantly, we ask: can commonhold function at scale in complex urban developments?

Richard and Lizzie explore:

• Why leasehold became the dominant structure for flats and the historic legal problem behind it.
• Why commonhold failed to gain traction after its introduction in 2004 by the Commonhold and Leasehold Reform Act 2002..
• What the Draft Commonhold and Leasehold Reform Bill would change in practice, including restrictions on creating new long leasehold flats.
• The practical governance and liability risks for commonhold associations, particularly in higher-risk buildings.
• Whether commonhold can realistically function at scale in complex urban and mixed-use developments.
• What developers, investors and affordable housing providers should be considering now.

If you work in development, investment, or affordable housing, commonhold is not something you can afford to ignore.

Other cases mentioned: 

• Unpacking the Enforceability of Restrictive Covenants
• Austerberry v Corporation of Oldham (1885)
• Spencer's Case [1583]

Training & Free Webinars for Property Professionals:

Would you like to keep up to date with the latest in real estate law? Davitt Jones Bould offers legal training tailored to your organisation’s needs, delivered in person across the UK or remotely. We also run free monthly webinars through for surveyors, solicitors, and property professionals across sectors. To sign up or learn more, visit our events page here or email djb.events@djblaw.co.uk for information and booking. 

This podcast is for informational purposes only and is not intended to provide legal or professional advice. No liability is accepted by Davitt Jones Bould for any reliance placed on its content.

Transcript

00:00:01 Lizzie Collin
Hello Richard.

00:00:02 Richard Snape
Hello, Lizzie. And what have you been up to lately?

00:00:04 Lizzie Collin
I have been busy for a Monday. Thank you. We've had a webinar already and start the week and yes, and we're here for a long-awaited discussion about the draft common hold and leasehold reform bill which came out on the 27th of Jan.

00:00:21 Lizzie Collin
And has been the topic of lots of conversation in the industry. So do you want to just start by giving everybody the background what is common hold? Why do we need it?

00:00:30 Richard Snape
Well, I'm sure what? Why do we need it? It's the first thing is it's a draft bill. It's for consultation. The actual consultation ends on April the 24.

00:00:40 Richard Snape
This year, so you've still got time, Lizzy, to put your bit in. I'll tell you the real background. I'll go back to sort of landlord days. It's not just about flats, but it's primarily designed to be, you know, in relation to flats. If and when it comes in, they're saying before the next election.

00:01:00 Richard Snape
It will be unlawful to create new Lease sold flats of dwellings or flats of  more than 21 years duration, with a few exceptions like shared ownerships and build to rent.

00:01:15 Richard Snape
And equity release and Islamic mortgages, which work on the sale and leaseback Community Housing as well and and it all goes back to 1885 and the case court appeal case called horse to be an Oldham Corporation, which I think was one of our top cases that we recorded years back, remember that.

00:01:36 Lizzie Collin
I do, yes.

00:01:37 Richard Snape
Are they still available?

00:01:39 Lizzie Collin
Yes, we can link to it in.

00:01:40 Lizzie Collin
The description for people.

00:01:41 Richard Snape
Yeah. So anyway, it's supposed to be the most disastrous case in the whole of English and Welsh property law. It said that in freehold land you can enforce restrictive covenants and their property rights.

00:02:00 Richard Snape
So they can bind subject to things like registration, but we won't go down that route. They can bind third parties. Well, positive covenants. You can't and maintenance is a positive government and that's caused problems ever since. If it's a leasehold on the other hands, if the lease was created prior to.

00:02:19 Richard Snape
Landlord and tenant come. That's like coming into force on January the 1st, 1996.

00:02:23 Richard Snape
The covenants will be binding under something called Spencer's case from 1583, which we also did one of our.

00:02:33 Richard Snape
Property cases if they touch and concern the land, the covenants will pass with the land and buying third party. Since 1996 they do under Section 3 of the Landlord and Tenant Covenants Act unless they're made personal when they're created and it's absolutely essential you have maintenance and blocks of flats.

00:02:56 Richard Snape
And you need common parts to be maintained and you need structure and exterior and dividing walls and so on the roof to be maintained, which is why the vast majority of flats in this country have been created to release those long leaseholds. But they've received a lot of Flack over the last few years.

00:03:15 Richard Snape
Primarily because of developers and imposing escalating ground rents.

00:03:21 Richard Snape
Nowadays, since the lease sold were formed, ground rent came in and the end of June 2022. Then you can only create peppercorn unless it's an exception, like a shared ownership and equity release and then but governments have thought to themselves, let's do something about it and they will. What they want to do is resurrect common hold, which actually came into force.

00:03:50 Richard Snape
In September the 27th, 2004, I was doing courses on common hold when it was brand new. When I was just a child lecturer with dog hair, but it never took off. I think last I saw was around about just under 200 common hold units in less than 20 developments for various reasons.

00:04:12 Richard Snape
Shall I explain a common hold in a nutshell?

00:04:16 Lizzie Collin
Yes, please.

00:04:16 Lizzie Collin
OK.

00:04:18
Well, what you.

00:04:18 Richard Snape
Do is you set up a common hold association?

00:04:24 Richard Snape
And the common hold association will have the freehold. It's not a different type of state in land as people say it's it's, it's freehold, they'll have the freehold of the common parts to say it doesn't have to be flat, it could be other things besides could be commercial, it could be houses, could be a mixture.

00:04:42 Richard Snape
And they will, well, all the various unit holders will have the freehold to an individual unit. So you could have a freehold flat and all the unit holders would come members of the common hold association.

00:04:56 Richard Snape
Limited by guarantee, you know currently the 1 LB. Guarantee and they're all agree something called a common hold community statement.

00:05:06 Richard Snape
Looking at memo and articles of association and so on, no, all the great common whole Community statement which dictates the various terms and obligations and rights between the various parties to the common hold and periodically you'll have to pay a common hold assessment. You can have local rules and the likes that deal with the specific premises.

00:05:27 Richard Snape
Periodically, you'll come and hold the assessment to pay for things like repairs, maintenance, gardening if needs be, and so on. Improving the premises. And that's the idea that's common hold.

00:05:42 Richard Snape
And it sounds remarkably like a residence management company.

00:05:47 Richard Snape
Because that's basically what it is.

00:05:49 Richard Snape
You and a residence management company, aren't you?

00:05:52 Lizzie Collin
I am indeed, yes.

00:05:56 Richard Snape
They are.

00:05:58 Richard Snape
Basically, you're going to 999 year lease if your place in Bristol. There's not too much difference between 999 year lease and and freehold and and basically the common hold association is the equivalent of a residence management company the common hold.

00:06:03 Lizzie Collin
Yeah. Ready.

00:06:17 Richard Snape
Assessment is the equivalent of a service charge and the Community statement is the equivalent of a of a of a lease.

00:06:26 Lizzie Collin
Yeah.

00:06:26 Richard Snape
That's the basic idea, so there'll be no ground rents or anything like this, but that's the basic idea.

00:06:32 Lizzie Collin
OK, so with the new bill or draft bill, what's going to change?

00:06:36 Richard Snape
Well, it never took off for many reasons. Until recently, mortgage companies didn't. Most mortgage companies would say no to it. They most say yes now because there's obviously been pressure from the government and insurers don't like it for various reasons.

00:06:49 Richard Snape
Either and it it sort of it. It had various issues. 1 is that there is no ability to affect forfeiture.

00:06:59 Richard Snape
And and therefore there was inadequate, you know, threats for the people who didn't pay the Community statements. So the Community assessments, Commonwealth assessments and and also the statutory control under the 85 landlord and Tenant Act of service charges.

00:07:18 Richard Snape
In leasehold dwellings didn't apply to common hold. You couldn't question the reasonableness where the work was reasonably incurred. There's no need to consult. And so on.

00:07:26 Richard Snape
But I think above all, probably together with the the mortgages and insurers not liking it, it you can't create a residential lease and a common holder for with more than seven years duration. And if you can't create residential leases, you can't have shared ownerships and you can't have equity release and this kind of thing and certainly a few years back you know you probably wouldn't get.

00:07:47 Richard Snape
Well, you wouldn't get planning permission unless you build an affordable housing and you know, historically that means shared ownerships. You can't have shared ownerships with Commonwealth. All the developments are quite small so far, but it's been talked about some time they governments and parliaments got this idea that Lisa is a feudal they're no more feudal than freehold, quite honestly.

00:08:12 Richard Snape
You know fixed maximum duration as opposed to freeholding of uncertain fixed maximum duration could be a 10,000 year lease or like you've got a 999 year lease.

00:08:22 Richard Snape
And freehold could be a life interest which lasts for your life. Not normal, but it could be very.

00:08:34 Richard Snape
So there were sort of various issues, but what was the previous government we're talking about sort of amending well then in The King's Speech after the last election in July of 2024 was the King's?

00:08:45 Richard Snape
Teaching them, the government announced that they were going to go ahead and publish this draft commonhold leasehold reform bill. It was meant to.

00:08:53 Richard Snape
Be published last.

00:08:54 Richard Snape
Year and it kept being put back and put me back.

00:08:56 Richard Snape
And put back and just before Christmas, they announced that due to unforeseen circumstances.
00:09:02 Richard Snape
It won't be published in 2025. But then it was published on, as we mentioned January the 27th this year and it's been talked about much.

00:09:12 Richard Snape
And it makes a lot of changes. It's not just about common hold, but it makes a lot of changes. Most notably, you will be able to create term leases more than seven years in relation to shared ownerships and equity release. And you know, Islamic mortgages and the likes in common hold.

00:09:29 Richard Snape
And and also at the moment you have to have buildings insurance, but in the future you'll have to also have public liability insurance. And unlike moment in the future, there'll be a a mandatory reserve fund to deal with emergencies like the ability to create fixed or floating.

00:09:49 Richard Snape
Charges to pay for such.

00:09:50 Richard Snape
Things which isn't there at the moment.

00:09:54 Richard Snape
And also significantly, it won't be a sort of one-size-fits-all. You can have sections, different parts of the development in the big common holds. In particular having different assessments and the likes because otherwise you know it doesn't make sense for houses to have the same assessment as flats to have the same assessment of commercial property.

00:10:14 Richard Snape
And although they're not going to have forfeiture, they're going to get rid of four feature and lethal dwellings. Uh, generally in the same bill. Then you'll be able to go to court if somebody doesn't pay the the assessment and the courts will have a wide discretion.

00:10:34 Richard Snape
Ultimately, they could force sale of the property and I say the there are quite a few other things besides uh. No event fees in the event of you selling or whatever apart from in retirement homes and and it's going to be a complete.

00:10:50 Richard Snape
And utter rewrite.

00:10:51 Richard Snape
And as I say, sometimes if we're to be believed before the next election, with those exceptions, you could be fined if you try and create a a leasehold flat.

00:11:01 Richard Snape
There's also provisions already, and they at least hold them freehold reform.

00:11:05 Richard Snape
Act, which than newly sold houses, but that's just seems to be going nowhere at the moment, with a few exceptions. Again, like shared ownerships and also at the moment if you want to convert your your lease old block into commonhold, you could get 100% agreement with all the parties, the freeholder, all the mortgage companies.

00:11:25 Richard Snape
Involved they are going to only require a 50% agreement of the various parties. They say in the future you still need the mortgage and the freeholders consent with only 50% of the various unit holders. And if people don't want to go ahead with the having a common hold, they're happy with their leases. They can keep their leases, but when they come to sell.

00:11:45 Richard Snape
They'll have to sell it. Come and hold, which the mind boggles a little bit on.

00:11:50 Richard Snape
So that's the basic idea. That's the common hold. So the draft bill, there's a lot of other things besides, but that's the common hold side of things.

00:11:58 Lizzie Collin
So what are your conclusions, Richard? What do you think about?

00:12:00 Lizzie Collin
All of this well.

00:12:03 Richard Snape
It's like any management company. Lizzie, you need to have somebody managing it. You often, you know, anybody's got to deal with the residents, management management companies. The first first property I ever bought a maisonette.

00:12:18 Richard Snape
In Westbury Park in Bristol.

00:12:20 Lizzie Collin
Very nice.

00:12:21 Richard Snape
On a long lease.

00:12:24 Lizzie Collin
Westbury Park's very nice.

00:12:26 Richard Snape
Well, that's that's just me, isn't it? Even though they're the managing agents, they they're obviously going to get rid of them and they're trying to persuade somebody to spend 20 minutes of their confirmation statement.

00:12:46 Richard Snape
As a cop that I left various reasons for that.

00:12:48 Richard Snape
One was more often.

00:12:49 Richard Snape
And that's just for sort of five flats in a townhouse converse.

00:12:55 Richard Snape
You're not going to be able to cope with the management if you've got 50 flats and in the mixed mixed-use development and I would not even dream of becoming a director of a common hold association if it was a higher risk building under the Building Safety Act. It's got at least two residential units 18 metres or more in.

00:13:14 Richard Snape
Heights or or 11 or more stories, because the communal association will be the accountable person and have quite stringent criminal offences attached.

00:13:25 Richard Snape
That's made clear in section 72 of the Building Safety Act. They will have quite stringent criminal offences for non compliance and they're not going to be able to comply with the higher risk buildings regime unless they use somebody to help them. And I'll tell you my tale and finish off with.

00:13:45 Richard Snape
That I do know people who've done common hold convincing, they say. At least it's standardised, you know, it's it's not differ.

00:13:51 Richard Snape
Cool.

00:13:54 Richard Snape
But this is my other concern. I remember years back when it was brand new during a course in Bournemouth and about common hold and the solicitor there telling me he was Carrie was called to talk to the members of an exclusive retirement development in Christchurch. Would you like to convert your leases?

00:14:12 Richard Snape
It will be so block into common hole because.

00:14:15 Richard Snape
That way you can avoid the social stigma attached to being a leaseholder. You're shunned in the streets of.

00:14:21 Richard Snape
Christchurch people just walk over to the other side of the road

00:14:25 Richard Snape
And he was explaining comment longer after a couple of minutes and irate woman stood up and said, Mr. Smith, you're talking to the members of an exclusive Christchurch retirement development. Are you really suggesting that people like us would ever wish to become common, and that's the other problem. If they recorded exclusive hold, we'd have it everywhere by now.

00:14:44 Lizzie Collin
It's all about marketing, Richard, isn't it?

00:14:47 Richard Snape
Yeah, it's my agents call them.

00:14:50 Richard Snape
Leasehold management companies share of the freehold was to hide the word leasehold. Do you know what they should do? Lizzie, if you wanted to. It's not just about flats and blocks of flats. And so it's about maintenance of private roads and likes, you know, on estate, rent charges or deeds of permanent restrictions makes life a lot more.

00:15:10 Richard Snape
Difficult, and it's all because of the case we started off with horse degree and Oldham Corporation.

00:15:15 Richard Snape
And if they wanted, I would do something useful in Parliament and government. They'd just reverse that. They'd have some provisions you'd still need management, but you'd have some provision whereby restrictive and positive covenants.

00:15:30 Richard Snape
Can be enforceable against third parties in in freehold land and that's my solution. That's where I'm standing for Parliament on.

00:15:37 Lizzie Collin
Richard's manifesto.

00:15:38 Richard Snape
You have my manifesto.

00:15:40 Lizzie Collin
Well, thank you very much, Richard.

00:15:43 Richard Snape
Thank you.