Wrigleys to help shape the commonhold debate
Commonhold was trumpeted as a new system of landholding when it was introduced about 15 years ago but is being looked at again now.
It is designed to allow members of a "commonhold association" to own the freehold of their houses or flats and for shared areas to be held in common and was intended to be an alternative to leasehold arrangements but has never taken off. The government is now looking at trying to re-energise it, possibly in the light of their consultation on banning new leaseholds.
Wrigleys has been asked to give evidence to the Law Commission as to why we feel commonhold has not been taken up by owners and lenders. Originally, the government asked interested parties to feed back on its pre-consultation document by 23 April and we raised the drawbacks (as we see them) for community-led housing groups. We feel the drawbacks are:
- On the face of it the Commonhold and Leasehold Reform Act rules out any restrictions on the sale of a commonhold unit (ie. a house or flat). This means that groups cannot veto prospective members who they feel do not fit with their ethos – for some groups this is fine but it does not suit all groups.
- The commonhold association has a set form of articles of association and, in addition, has a further governing document called a commonhold community statement. Both these statutory documents are rather inflexible which means that there is little scope for catering for the quirks of some community-led housing groups.
- Lots of groups choose a leasehold structure as it offers a route of ensuring that all tenant members contribute to the community. This is a harder thing to do with a freehold structure and similarly difficult in commonhold. Theoretically, the commonhold community statement could provide an answer but its current inflexible form does not allow it to do so.
However, we also think that commonhold could be made to work well and, in particular, that it could be a means of lightening the burden of the double stamp duty land tax payment that can affect community-led housing groups. It is too late to comment directly to the government at this stage, although there should be a formal consultation later this year which will provide another opportunity.
If you have any comments that you wish to make at this early stage, please send them to Emma Ridge (email@example.com) by 7 June 2018 and we will try to ensure they are considered.
If you would like to discuss any aspect of this article further, please contact Emma Ridge or any other member of the Community-led housing team on 0113 244 6100.
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The information in this article is necessarily of a general nature. Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors.