Commonhold Explained — The Alternative to Leasehold That Never Took Off

What Is Commonhold?

Commonhold is a form of property ownership introduced by the Commonhold and Leasehold Reform Act 2002 and available in England and Wales since 2004. Under commonhold, the owner of each flat holds their individual unit as freehold — outright ownership with no lease counting down and no landlord above them. The building’s common parts (stairwells, roof, external walls, communal gardens) are owned collectively by a **Commonhold Association**, a company limited by guarantee of which every unit holder is automatically a member.

There is no ground rent. There is no lease to run down. There is no freeholder to seek consent from or pay premiums to. In theory, it is a cleaner, fairer system than leasehold.

How Commonhold Works

Each flat is defined as a **commonhold unit** with boundaries set out in a **commonhold community statement** — a document that also records the rules governing the use of units and common parts, and each unit holder’s percentage liability for the costs of the common parts (the equivalent of service charges).

The Commonhold Association holds and manages the common parts, raises a **commonhold assessment** (the equivalent of service charges) from all unit holders, and enforces the community statement. Decisions about the building are made by the unit holders as members of the association, typically by majority vote at general meetings.

Why Commonhold Was Meant to Solve Leasehold Problems

The problems with leasehold are structural:

• Leases count down, reducing the property’s value over time
• Freeholders can charge ground rent, extract premiums for consents, and profit from the management of the building
• Leaseholders must pay to extend their lease, often at significant cost
• The landlord-tenant relationship creates an inherent conflict of interest

Commonhold eliminates all of these issues. There is no lease to extend, no ground rent to pay, and no landlord to profit from the arrangement.

Why Commonhold Failed

Despite these advantages, commonhold has been an almost complete failure in practice. As of 2024, fewer than 20 commonhold titles exist in England and Wales — effectively zero adoption over two decades.

The reasons are well-documented:

• **Mortgage lenders refused to lend.** In the early years after 2004, most mainstream lenders declined to offer mortgages on commonhold properties. Without mortgage availability, developers had no commercial reason to build commonhold.
• **Developer preference for leasehold.** Leasehold generates ongoing income streams for developers and freeholders through ground rents, consent fees, and lease extension premiums. Commonhold eliminates these entirely. Developers had no incentive to adopt it.
• **Complex insolvency provisions.** The 2002 Act contained complex and untested rules about what happens if a commonhold association becomes insolvent. Lenders and lawyers were uncomfortable with the uncertainty.
• **No compulsion.** Parliament made commonhold optional rather than mandatory. Without a legal requirement to use it, the market defaulted to the familiar leasehold model.

The Law Commission’s 2020 Report

In 2020, the Law Commission published a major report recommending a comprehensive overhaul of commonhold to make it workable. Recommendations included:

• Simplifying the insolvency provisions
• Making it easier to convert existing leasehold buildings to commonhold
• Reducing the consent threshold for conversion
• Making commonhold the default for new builds

The Government broadly endorsed these recommendations but has not yet legislated to implement them.

The Leasehold and Freehold Reform Act 2024

The 2024 Act did not mandate commonhold. It did include some enabling provisions and expressed a policy direction towards commonhold, but the fundamental barrier — the requirement for unanimous consent of all leaseholders and the freeholder to convert an existing building — remains in place. Converting a block of 50 flats from leasehold to commonhold still requires every single leaseholder and the freeholder to agree. In practice, this makes mass conversion almost impossible.

What Converting to Commonhold Involves

For a new development, the developer simply registers the building as commonhold at HM Land Registry at the outset. For an existing leasehold building, conversion requires:

1. All existing leaseholders to agree

2. The freeholder to agree

3. All mortgage lenders to consent

4. Surrender of all existing leases

5. Grant of new commonhold unit titles to all unit holders

The unanimous consent requirement is the critical barrier. Even one dissenting leaseholder (or lender) can block conversion.

The Future

There is broad cross-party political support for making commonhold the dominant form of flat ownership in England and Wales. The Law Commission’s reforms, if enacted, would lower barriers to conversion and make commonhold the default for new developments. Until those reforms are legislated and commenced, however, commonhold remains a curiosity rather than a practical option for most flat owners.

Property Passport UK monitors leasehold reform developments and records tenure type for all registered properties, helping owners and buyers understand their ownership structure and track changes in the law that may affect them.