Keeley Livingstone, lease extension lawyer at Holmes & Hills discusses the increasing calls for more properties to become commonhold, led by the government's law reform adviser.
At present, the two main forms of property ownership fall into either freehold property or leasehold. However, fourteen years ago a new system was introduced – commonhold.
In a similar fashion to freehold ownership, commonhold allows people to own their flats or houses outright with no leases that could expire. This means that residents do not have a landlord and they become members of the management company to allow them to vote on matters such as the upkeep of the property.
In contrast compared to leasehold properties whereby the resident has to purchase a lease, which provides the rights to use the property. This means when the lease ends the property returns to the freeholder, or the owner must pay to increase the lease through a lease extension.
The majority of flats tend to be leasehold however, the Law Commission has urged more properties to be built on a commonhold system to alleviate the requirement to pay management fees and allow a greater flexibility for owners. Despite the Commonhold Act being introduced fourteen years ago only 20 commonhold developments have been created, including only one in London.
The Law Commission has attributed the low take-up of commonhold properties to a variety of reasons including a lack of awareness of the system, a lack of willingness to lend by mortgage companies and current financial incentives being in place to encourage developers to build leasehold properties.
The Law Commission has also said a reform would allow properties to convert from a leasehold to a commonhold system and would replace the service charges which are often set by the landlord to a commonhold system that would mean all residents would have to approve the charges, thereby allowing them greater control.
However, given the small uptake of commonhold properties so far it appears that a culture change also needs to occur in order to allow more mortgage providers to be confident in lending for commonhold properties and for residents to understand the key differences when they are making a property purchase. Until this takes place it remains likely that the majority of flats will stay as leasehold properties and therefore the demand for leasehold extension solicitors is likely to remain high.
If you own a leasehold property and need to extend your lease, please contact our residential property team on 01376 320456 (Braintree) or 01787 275275 (Sudbury) for further information. Holmes & Hills Solicitors have five offices across Essex and Suffolk and are able to help extend your lease.
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